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1 1 UNITED STATES OF AMERICA 2 BEFORE THE 3 INTERNATIONAL TRADE COMMISSION 4 5 - - - - - - - - - - - - - - - - x 6 IN THE MATTER OF: : Investigation Numbers 7 STEEL CONCRETE REINFORCING BAR : 701-TA-564 AND 8 (REBAR) FROM JAPAN, TAIWAN, : 731-TA-1338-1340 9 AND TURKEY : (PRELIMINARY) 10 - - - - - - - - - - - - - - - -x 11 12 Courtroom A 13 U.S. International Trade 14 Commission 15 500 E Street SW 16 Washington, DC 17 Tuesday, October 11, 2016 18 19 20 The meeting commenced, pursuant to notice at 9:30 21 a.m., before the Investigative Staff of the United States 22 International Trade Commission, Michael Anderson, Director 23 of Investigations. 24 25 Ace-Federal Reporters, Inc. 202-347-3700

2 1 APPEARANCES: 2 William R. Bishop, Supervisory Hearings and Information 3 Officer 4 Sharon Bellamy, Records Management Specialist 5 Tyrell Burch, Legal Document Specialist 6 7 Michael Anderson, Director of Investigations 8 Joanna Lo, Investigator 9 Douglas Corkran, Supervisory Investigator 10 Karen Taylor, International Trade Analyst 11 Gregory LaRocca, International Trade Analyst 12 Emily Burke, Economist 13 Michele Breaux, Economist 14 David Boyland, Accountant/Auditor 15 Joseph Laroski, Attorney 16 Mark Jane Alves, Attorney 17 18 19 20 21 22 23 24 25 Ace-Federal Reporters, Inc. 202-347-3700

3 1 Opening Remarks: 2 Petitioners (Alan H. Price, Wiley Rein LLP) 3 Respondents (Matthew Nolan, Arent Fox LLP) 4 In Support of the Imposition of Antidumping and 5 Countervailing Duty Orders: 6 Wiley Rein LLP 7 Washington, DC 8 on behalf of 9 Rebar Trade Action Coalition 10 Burke Byer, President and Chief Executive Officer, Byer 11 Steel 12 Tracy Porter, Executive Vice President of Operations, 13 Commercial Metals Company 14 Peter Campo, President, Gerdau Long Steel North America 15 Marcelo Canosa, Director, Rebar and Wire Rod, Gerdau 16 Long Steel North America 17 Don Barney, Director of Sales and Marketing – Bar Mill Group, 18 Nucor Corporation 19 Don Barney, Director of Sales & Marketing - Bar Mill 20 Group, Nucor Corporation 21 Roy Houseman, Legislative Representative, United Steel, 22 Paper and Forestry, Rubber, Manufacturing, Energy, Allied 23 Industrial and Service Workers International Union 24 Dr. Seth Kaplan, Senior Economic Advisor, Capital Trade 25 Inc. Ace-Federal Reporters, Inc. 202-347-3700

4 1 Alan H. Price and John R. Shane - Of Counsel 2 3 In Opposition to the Imposition of Antidumping and 4 Countervailing Duty Orders: 5 Arent Fox LLP 6 Washington, DC 7 on behalf of 8 Turkish Steel Exporter's Association 9 Namik Ekinci, President, Turkish Steel Exporter's 10 Association 11 Ebru Dursun, Specialist, Turkish Steel Exporter's 12 Association 13 Matthew Nolan - Of Counsel 14 15 Harris Moure LLP 16 Seattle, WA 17 on behalf of 18 Taiwan Steel & Iron Industry Association 19 Adams Lee - Of Counsel 20 21 Rebuttal/Closing Remarks: 22 Petitioners (John R. Shane, Wiley Rein LLP) 23 Respondents (Matthew Nolan, Arent Fox LLP) 24 25 Ace-Federal Reporters, Inc. 202-347-3700

5 1 I N D E X 2 Page 3 Opening Remarks: 4 Petitioners (Alan H. Price, Wiley Rein LLP) 8 5 6 Respondents (Matthew Nolan, Arent Fox LLP) 12 7 8 Peter Campo, President, Gerdau Long Steel North America 16 9 10 Don Barney, Director of Sales & Marketing - Bar Mill Group, 11 Nucor Corporation 22 12 13 Tracy Porter, Executive Vice President of Operations, 14 Commercial Metals Company 27 15 16 Burke Byer, President and Chief Executive Officer, Byer 17 Steel 33 18 19 Roy Houseman, Legislative Representative, United Steel, 20 Paper and Forestry, Rubber, Manufacturing, Energy, Allied 21 Industrial and Service Workers International Union 37 22 23 Dr. Seth Kaplan, Senior Economic Advisor, Capital Trade 24 Inc. 43 25 Ace-Federal Reporters, Inc. 202-347-3700

6 1 I N D E X 2 Page 3 Namik Ekinci, President, Turkish Steel Exporter's 4 Association (via interpreter Ebru Dursun, Specialist, 5 Turkish Steel Exporter's Association) 122 6 7 Adams Lee - Of Counsel 144 8 9 Rebuttal/Closing Remarks: 10 Petitioners (John R. Shane, Wiley Rein LLP) 183 11 12 Respondents (Matthew Nolan, Arent Fox LLP) 191 13 14 15 16 17 18 19 20 21 22 23 24 25 Ace-Federal Reporters, Inc. 202-347-3700

7 1 P R O C E E D I N G S 2 MS. BELLAMY: Would the room please come to 3 order. Can you be seated, please. 4 MR. ANDERSON: Good morning, and welcome to the 5 International Trade Commission. This conference in 6 connection with preliminary phase Antidumping and 7 Countervailing Duty Investigation Numbers 701-TA-564 and 8 731-TA-1340, concerning imports of steel concrete 9 reinforcing bar, or rebar, from Japan, Taiwan and Turkey. 10 My name is Michael Anderson. I am the director 11 of the Office of Investigations, and I'll be presiding at 12 this conference. 13 Among those present from the Commission Staff 14 are on my far right, we have Mr. LaRocca and Mrs. Taylor, 15 who are industry analysts. On my far left we have our 16 investigator, Joanna Lo, and on my immediate left are two 17 attorneys, Mary Jane Alves and Joseph Laroski. And on my 18 right we have two economists, Michele Breaux and Emily 19 Burke. And on my far right is David Boyland, our 20 financial, accountant and auditor. And our supervisory 21 investigator Mr. Corkran will be in and out of this 22 conference, because he also has double duty with a hearing 23 in the next room on copper pipe and tube. 24 I would like to remind all speakers not to refer 25 in your remarks to business proprietary information and to Ace-Federal Reporters, Inc. 202-347-3700

8 1 speak directly into the microphones. We also ask that you 2 state your name and affiliation for the record before 3 beginning your presentation or answering any questions for 4 the benefit of our court reporter. 5 All witnesses must be sworn in before presenting 6 testimony. I understand the parties are aware of their 7 time allocations. 8 Are there any questions regarding time 9 allocations? If so, they should be addressed to the 10 secretary. 11 Are there any questions? 12 Madam secretary, are there any preliminary 13 matters? 14 MS. BELLAMY: No, Mr. Chairman. 15 MR. ANDERSON: Very well, madam secretary. Let 16 us proceed with opening remarks. 17 MS. BELLAMY: On behalf of petitioners, Alan H. 18 Price, Wiley Rein LLP. 19 OPENING REMARKS OF ALAN H. PRICE 20 MR. PRICE: Good morning, Mr. Anderson and 21 members of the Commission Staff. I am Alan Price, here 22 today on behalf of the domestic industry. 23 We appreciate the Staff's renewed attention to 24 the crisis facing the U.S. rebar producers. 25 I would like to begin by looking back at the Ace-Federal Reporters, Inc. 202-347-3700

9 1 recent history and to put this investigation in context. 2 In late 2014, the Turkish industry told you 3 that, and this is a quote, "there is no incentive for the 4 subject producers to price aggressively in order to expand 5 exports to the United States." 6 Allow me to tell you what really happened. In 7 2015, Turkish rebar imports grew by more than 640,000 tons 8 over 2014 levels to 1.6 million tons. In just the first 9 half of the year, of this year, rebar imports from Turkey 10 exceeded their 2013 volumes, which were previously found to 11 be injurious. In 2013, Turkey shipped 7.6 percent of its 12 total rebar exports to the United States. By 2015, the 13 United States was Turkey's largest export market for rebar, 14 accounting for 18.7 percent of their production, or their 15 exports. 16 This share has only continued to grow, reaching 17 nearly 20 percent thus far in 2016. These are remarkable 18 trends for an industry that isn't supposedly interested in 19 the U.S. market. 20 Growth in Japanese and Taiwanese imports has 21 been no less shocking. They have surged into the market 22 over the POI, especially after the 2014 antidumping order 23 on Mexico took effect. And they have been hammering the 24 U.S. industry. 25 From 2014 to 2015, Japanese volumes increased by Ace-Federal Reporters, Inc. 202-347-3700

10 1 nearly 200 percent and Taiwanese volumes grew by more than 2 500 percent. 3 On a cumulated basis, the subject import volumes 4 grew by around 1.2 million tons over the POI and have 5 remained at very high levels in 2016. 6 Whatever they may tell you, these industries are 7 keenly interested in exporting, they are opportunistic and 8 they are targeting the U.S. market. 9 Imports from all of these countries are piling 10 up on the docks, driving prices as low as we have seen in a 11 very long time, well below $400 a ton according to recent 12 press reports. 13 This acceleration of already high subject import 14 volumes in 2015 came at the direct expense of domestic 15 production volumes and domestic workers. With modest 16 demand growth and orders on dumped imports from Mexico, 17 domestic mills anticipated a stronger market and tried to 18 regain adequate pricing. 19 But the subject imports flooded in at unfair 20 prices, capturing an additional 9.4 percentage points of market 21 share in 2015, while the domestic industry lost 6 percentage 22 points of market share. 23 As the domestic industry lost sales, production 24 fell, capacity utilization was depressed further, and 25 workers started losing their jobs. Ace-Federal Reporters, Inc. 202-347-3700

11 1 Faced with the likelihood of further volume 2 losses, U.S. mills had no choice but to slash prices in 3 late 2015 and 2016, giving away any profit recovery 4 resulting from the antidumping order on Mexico and the CVD 5 orders on turkey. 6 Following subject -- following subject import 7 prices downwards, the domestic industry AUVs fell by more 8 than $120 a ton in the first half of 2016. This allowed 9 them to stabilize market share in the short term, but only 10 with dramatic financial consequences. 11 The domestic industry's operating profits fell 12 by $170 million a ton. Operating margins all but 13 disappeared, and net incomes turned negative. 14 This is material injury, and it is the result of 15 competition with unfairly traded subject imports. The 16 preliminary pricing data shows pervasive and increasing 17 underselling throughout the POI on a product that the 18 Commission has found repeatedly is highly interchangeable 19 and is overwhelmingly sold on the basis of price. 20 The Commission has confirmed huge volumes of 21 lost sales to the subject imports in this investigation. 22 The Commission has also found repeatedly that imported 23 rebar competes head to head with domestic rebar throughout 24 the market and that the domestic industry is not insulated 25 from the effects of import competition. Ace-Federal Reporters, Inc. 202-347-3700

12 1 Nothing has changed here. Things will only get 2 worse without relief. The Commission's formal period of 3 investigation ends in June 2016, but in the third quarter, 4 the subject imports cut prices even further to take 5 additional volume from the domestic industry. The U.S. 6 market is large, open and attractively priced. While poor 7 conditions in the subject import producers' home and export 8 markets will incentivize growing shipments to the United 9 States, the domestic industry is already severely weakened 10 and cannot withstand another year of pressure from nearly 2 11 million tons of dumped and subsidized industry -- imports. 12 On behalf of the U.S. rebar industry and its 13 workers, we urge the Commission to make a preliminary 14 affirmative injury determination. Thank you. 15 MS. BELLAMY: On behalf of Respondents, Matthew 16 Nolan, Arent Fox, LLP. 17 OPENING REMARKS OF MATTHEW NOLAN 18 MR. NOLAN: Good morning, members of -- ladies 19 and gentlemen of the Commission Staff. Again, my name is 20 Matt Nolan with Arent Fox. As usual, we represent the 21 Turkish Steel Exporters Association and it's members in the 22 concrete steel reinforcing rebar sector from Turkey, which 23 includes Icdas, Habas, Colakoglu and others. Fortunately, 24 today we're also joined by counsel for the Taiwanese Steel 25 Association which we will hear from later today. I get the Ace-Federal Reporters, Inc. 202-347-3700

13 1 honors to do the opening. 2 So in the words of the late great Mark Twain, 3 history may not repeat itself but it often rhymes. Just 4 two years ago, we were before the Commission on the exact 5 same case, Antidumping and Countervailing Duty claims 6 against Turkish rebar producers. Of course now we have an 7 Asian twist to it. 8 The result in that case was a finding of zero 9 dumping margins, de minimis subsidies for Habas a barely 10 above a de minimis subsidy fine against Icdas on what I 11 consider to be a very questionable basis. 12 The latter, though, was enough for the 13 Commission to find injury in the subsidies case only but no 14 dumping order was issued. 15 Having been exonerated of dumping charges and 16 having one producer without subsidies and one confident 17 that 1.25 percent would be manageable, Turkish producers 18 expected they were not under threat of a new case. They 19 were wrong. 20 The U.S. industry was not happy with the result 21 they got, and so they want a mulligan. They want to take a 22 second bite at disrupting the U.S. market and perhaps 23 further restricting access. Maybe they will succeed, maybe 24 not. But I have some questions. 25 How frequently should U.S. producers be Ace-Federal Reporters, Inc. 202-347-3700

14 1 permitted to refile cases that have been adjudicated? What 2 conditions have changed since the last time around? The 3 mere presence of imports that have been adjudged to be 4 fairly traded would not seem to be enough. 5 Most Turkish exports are already under a CVD 6 order, they are by definition fairly traded in nonsubject 7 merchandise. You can't consider fairly traded imports in 8 the analysis. 9 Yes, Turkish imports have increased as a result 10 of the finding of no dumping and minimal subsidy. But 11 petitioners have not been impacted by the increased 12 imports. In fact, they appear to have improved their 13 performance during the short interim period from the last 14 case, as raw material costs declined massively between 2014 15 and 2015. 16 And yes, the U.S. market provides attractive 17 prices. In fact, they are the highest prices in the world. 18 It's hard to see why it would not be considered attractive 19 to a country that sells all over the world. 20 U.S. producers still benefit from vertical 21 integration, internal scrap operations, downstream 22 fabrication units, which consume a significant percentage 23 of their output, and that trend has nothing but continued 24 to accelerate. 25 This strategy has become more important even in Ace-Federal Reporters, Inc. 202-347-3700

15 1 the last two years since the last case. They are insulated 2 from competition. U.S. producers still benefit from Buy 3 America Act requirements, which is a significant part of 4 the structural construction market. 5 U.S. producers benefit significantly from buying 6 and declining scrap costs which have resulted in increased 7 profitability. They want to increase that margin even 8 further with these cases as the, quote, trade effects of 9 this petition will result in fewer buyers of Turkish 10 material. 11 U.S. producers showed great variability in their 12 performance of the POI. I urge the Commission to consider 13 carefully the different financial reporting that has 14 occurred with the questionnaire responses. Without getting 15 into specific details, there's a tremendous amount of 16 variability there. 17 Is this really a case of unfair imports, or is 18 it really a case of internal market competition among U.S. 19 producers? It is the latter, in our view. 20 The only things that have changed since 2014 is 21 that imports have increased and U.S. producers' margins 22 have improved. If volume is the only measure of injury, 23 then this deliberation will be short. 24 But we know it is not just a matter of volume. 25 Petitioners cannot show price effects. They cannot show a Ace-Federal Reporters, Inc. 202-347-3700

16 1 reasonable indication of injury by reason of subject 2 imports, and it is our intention to expand on these themes 3 during our main presentation. 4 Thank you. 5 MS. BELLAMY: Would the petitioners please come 6 forward. 7 MR. ANDERSON: Good morning, Mr. Price, and to 8 your panel of witnesses. Welcome here, and please proceed 9 when you're ready. 10 MR PRICE: Good morning, Mr. Anderson. Our 11 first witness will be Mr. Peter Campo, President of Gerdau 12 Long Steel North America. 13 STATEMENT OF PETER CAMPO 14 MR. CAMPO: Good morning, I'm Peter Campo, 15 President of Gerdau Long Steel North America and I want to 16 thank the Commission and Commission Staff for your renewed 17 attention to the problems that unfairly traded imports 18 continue to cause in this market. I appreciate the 19 opportunity to appear before you to explain why trade 20 relief from Turkish, Japanese and Taiwanese imports is 21 critical to Gerdau and to the rebar industry. 22 You are probably familiar with rebar by now, but 23 for those of you who are not, allow me to emphasize one 24 point. This is one of the most basic steel products that 25 you will examine. It's largely made to a single ASTM Ace-Federal Reporters, Inc. 202-347-3700

17 1 standard, mostly to one grade and only in a handful of 2 sizes. It has one purpose, to reinforce concrete in roads, 3 bridges and buildings. 4 Customers have few, if any, special 5 requirements, and quite simply, it doesn't matter where the 6 rebar is made or who makes it, it's sold on price. 7 Almost universally, whoever sells the lowest 8 gets the sale. The Commission has examined this product 9 several times, including just two years ago. Each time you 10 found that it's highly interchangeable and that price is a 11 critical factor in purchasing decisions. 12 This makes the domestic industry particularly 13 susceptible to injury from unfairly traded imports. We 14 compete with them directly, throughout the market, lead 15 times are not an issue as Turkish, Japanese and Taiwanese 16 material is stockpiled on the docks and at distribution 17 points, ready for purchase at extremely low prices. Nor is 18 freight an issue. The total freight costs from Turkey to 19 Baltimore is often the same or even less than the is cost 20 of shipping rebar from our mill in Sayreville, New Jersey, 21 into that same market. 22 Buy America sales continue to be a small and 23 declining share of the overall market, and we don't 24 anticipate that the FAST Act for highway infrastructure 25 will meaningfully increase the share of those sales. Ace-Federal Reporters, Inc. 202-347-3700

18 1 Even with the FAST Act, we anticipate only 2 to 2 3 percent growth per year, which is barely above inflation. 3 We've heard it described as a slight bump in 4 highway funding, and we think that characterization is 5 accurate. In any event, our customers don't tell us when 6 Buy America requirements apply, they just tell us the 7 lowest price they can get in the market and ask whether we 8 can meet it. 9 Price is king, whether we're selling to an 10 affiliated or unaffiliated customer, to a distributor or to 11 fabricators. We sell them all in exactly the same way and 12 we have to sell at competitive prices or we don't get the 13 sale. 14 As a result we're forced to fight cheap imports 15 for each and every sale, and we can't compete with dumped 16 and subsidized pricing. 17 While relief from dumped Mexican imports did 18 allow us regain profitable pricing for a time, unfairly 19 traded Turkish, Japanese and Taiwanese imports have flooded 20 the market in the two years since the last order. With 21 volumes growing continuously through 2015, 22 imports increased market share by undercutting us on price and 23 captured virtually all of the growth in demand, demand 24 which remains below prerecession levels. 25 Ace-Federal Reporters, Inc. 202-347-3700

19 1 By the third and fourth quarter of 2015, we were 2 hearing about inventories of the subject material building 3 up in the ports, and it was clear that they were going to 4 keep pushing greater and greater volumes into this market 5 with no regard for demand or any other conditions. 6 By 2016, facing the prospect of even greater 7 market share losses, we slashed prices to try and prevent 8 hemorrhaging volumes. The effect of this direct 9 competition with unfairly priced imports, has been 10 disastrous for Gerdau and more importantly, for our 11 employees. 12 Our production, sales, financial performance, 13 have all taken a significant hit, and we've been forced to 14 operate our facilities at far below optimal capacity 15 utilization levels. 16 As a result, our margins have suffered and we've 17 not been able to make necessary investments at our plants. 18 In 2014, we told the Commission cheap imports 19 forced us to idle our mills in Perth Amboy, New Jersey, and 20 Sand Springs, Oklahoma, at the cost of 550 workers that we 21 had to lay off. 22 At the time, we hoped that we would be able to 23 restart these mills and rehire these workers, and we 24 continue to maintain the mills with this outcome in mind. 25 Unfortunately, another wave of imports has kept Ace-Federal Reporters, Inc. 202-347-3700

20 1 us from doing so, and we had to sell both of these 2 facilities to real estate developers earlier this year. 3 Neither of them will ever make rebar again. 4 Since 2014, more adjustments have been necessary 5 in order to survive in this market, resulting in further 6 head count reductions. We've curtailed rebar production at 7 our St. Paul, Minnesota, mill in 2014 -- I'm sorry, in 8 2015, and we shifted rebar production from Charlotte, North 9 Carolina, facility to Knoxville, Tennessee. Together these 10 adjustments resulted in a layoff of almost 100 additional 11 employees. 12 Without trade relief, those numbers, each 13 representing a hard-working middle-class employee, will 14 continue to dwindle as imports increase. 15 The subject producers have growing production 16 capacity and weak home market conditions. Producers in all 17 countries are facing difficult competitive situations in 18 alternative markets, so they have little choice but to 19 target sales to the United States. 20 They may tell you they have no real interest in 21 the U.S. market and that their home markets are thriving or 22 that they want to export to other places. The last time we 23 were here, the Turkish industry told you, "there is no 24 incentive for the subject producers to price aggressively 25 in order to expand imports to the United States." They Ace-Federal Reporters, Inc. 202-347-3700

21 1 said that, "Turkey's rebar production will continue to be 2 absorbed in Turkey's home market and in its traditional 3 export markets." 4 Then from 2014 to 2015, U.S. imports of rebar 5 from Turkey grew by more than 640,000 tons, more than twice 6 their 2013 levels. Make no mistake about it, this is their 7 market of choice and they will continue to push higher 8 volumes into the United States at any price in order to 9 capture sales. 10 Unless trade relief is granted, it's clear that 11 the subject producers will continue to flood the market 12 with dumped and subsidized material at a time of only 13 modest and uncertain demand growth in the U.S. market. 14 Construction demand has recovered from the worst 15 of the financial crisis, but we have seen post-recession 16 growth begin to taper off over the last nine months. 17 The only way the U.S. market will be able to 18 absorb these growing import volumes is if they put us out 19 of business, and that seems to be exactly what they're 20 trying to do. 21 I truly believe the fate of our workers and 22 their families is tied directly to this case and to your 23 decision to allow the investigation to proceed. For the 24 sake of Gerdau and its employees, we urge you to grant 25 trade relief against unfairly traded imports from Turkey, Ace-Federal Reporters, Inc. 202-347-3700

22 1 Japan and Taiwan. 2 Thank you. 3 MR PRICE: Thank you. 4 Our next witness is Mr. Don Barney of Nucor 5 Corporation. 6 STATEMENT OF DON BARNEY 7 MR. BARNEY: Good morning, my name is Don 8 Barney, director of sales and marketing for Nucor 9 Corporation, the Bar Mill Group. For years Nucor has been 10 sounding the alarm that rising steel imports are inflicting 11 significant damage on the domestic steel industry. The 12 problem has only gotten worse. Opportunistic foreign steel 13 industry seem to view the United States as a market of both 14 first and last resort, particularly in the midst of the 15 current global overcapacity crisis. 16 This latest flood of rebar imports is a perfect 17 example. As soon as antidumping orders on Mexican rebar 18 were put in place in 2014, we started to increase prices 19 and recover financially. Before the market had time to 20 fully recover from the dumped Mexican volumes, the subject 21 imports flooded in, far in excess of demand. 22 By 2015, there were nearly 2 million tons of 23 these imports, up almost 80 percent over 2014. 24 As these volumes overshot the market, we saw 25 inventories piling up on the docks by the end of 2015. We Ace-Federal Reporters, Inc. 202-347-3700

23 1 tried to hold prices steady, but subject volumes kept 2 coming, exacerbating the overhang and undercutting on 3 price. 4 Since customers buy this product from whoever 5 sells lowest, we continued losing sales volume because of 6 dumped and subsidized import prices. 7 By late 2015, we had lost so much volume that we 8 ultimately had to slash prices to stop the bleeding and 9 avoid mill shutdowns. 10 We may have accomplished this, but only with a 11 huge hit to our bottom line. And no matter how low we go, 12 they go even lower. 13 In a market like rebar, subject imports readily 14 replace domestic production. This is one of the most 15 interchangeable steel products on the market. It is made 16 to the same standards and in the same sizes and lengths, sold 17 to the same customers, and used for the same purposes. No matter 18 who makes it or where it comes from, as a result, it is one 19 of the most price-sensitive steel products on the market. 20 Over the years, we have heard foreign producers 21 come in and try to convince you that we are protected from 22 the impact that they have on market pricing. We've heard 23 them say that Buy America protects us. We've heard them 24 say that affiliated fabricators and scrap suppliers 25 protect us. We've heard them say that they sell to Ace-Federal Reporters, Inc. 202-347-3700

24 1 different types of end users through different channels of 2 distribution. 3 We've heard them say that rebar imports are 4 necessary to fill a demand vacuum. 5 Thankfully you've recognized that none of this 6 is true and have rejected these arguments over and over 7 again. 8 Since Nucor has experience in some of these 9 areas, I would like to state at the outset that these 10 claims were wrong then and they are still wrong today. 11 First, Buy America simply has little impact on 12 the market, represents a small share of sales and we 13 generally have no idea whether a particular sale is a Buy 14 America project. Customers are not eager to share that 15 information with us because they fear it may limit their 16 ability to demand the lowest price available in the market, 17 almost always import. 18 Second, our affiliates are market players in 19 their own segments. They buy and then sell in accordance 20 with market conditions. We sell to both affiliated and 21 unaffiliated customers, whether they are end users or 22 distributors, and we compete for sales to all of our 23 customers in the same way. 24 Our affiliated fabricator, Harris Rebar, needs 25 to be competitive for sales of downstream products, and Ace-Federal Reporters, Inc. 202-347-3700

25 1 they can't do that if we force them to buy rebar from us at 2 elevated prices. We need to sell them at competitive 3 prices, and for the last couple of years, Harris has had to 4 purchase subject imports because we just couldn't compete 5 with unfairly traded subject import pricing. 6 Our scrap processors are the same. They are 7 separate, independent business centers with their own 8 profit motives, they buy scrap from them -- and we buy 9 scrap from them in competition with other buyers in the 10 open market. 11 Finally, there is no demand vacuum here that 12 requires massive volumes of unfairly priced imports. 13 Demand has been improving gradually, we are still far from 14 where we were before the financial crisis. 15 Growth in construction demand seems to be 16 leveling off, and we can't say how much longer it will be 17 until the next downturn. We have more than enough unused 18 capacity to satisfy modest demand growth we've been seeing, 19 and we are happy to sell to any customer at a fair price. 20 But dumped and subsidized imports have kept us 21 from doing so. In fact, domestic production declined in 22 2015, despite modest improvements in demand. 23 After the orders on Mexican imports took effect, 24 those dumped volumes began to decline. We thought that we 25 would be able to maintain prices and increase sales. Ace-Federal Reporters, Inc. 202-347-3700

26 1 Unfortunately, dumped and subsidized Turkish imports 2 continue to soar, even with the CVD order in place, even 3 after they told you they had no interest in increasing 4 shipments to the United States. 5 As if 600,000 additional tons of unfairly traded 6 Turkish material weren't enough, seemingly overnight, 7 Japanese volumes nearly doubled and Taiwanese volumes grew 8 fivefold. 9 After a year of losing sales, we've tried our 10 best to lower prices to compete, but these imports just 11 keep getting cheaper and cheaper. Their distribution 12 networks are growing as well. We are seeing foreign mills 13 increasingly sell directly to customers instead of through 14 brokers, and in customized lengths rather than standard 15 stock lengths, so competition is only growing fiercer. 16 Given the cyclical nature of the steel business, 17 this type of sudden, unfair import competition is 18 particularly harmful when demand seems to be growing, and 19 especially when that growth is limited and uncertain. 20 The steel industry depends on thriving when 21 conditions are good or just even decent, so we can invest 22 for the future and weather the storm when we inevitably hit 23 another down cycle. 24 It's hard enough to see our bottom line suffer 25 when we should be doing just fine. But it's harder to tell Ace-Federal Reporters, Inc. 202-347-3700

27 1 our teammates and their families that they won't be taking 2 home as much pay as they should be, even as they hear the 3 economy is doing better and improving a little bit. 4 At Nucor we tie compensation to production. 5 This usually allows us to avoid large-scale layoffs. But 6 every sale we lose to dumped and subsidized imports is 7 money out of our teammates' pockets. 8 For their sake and for the sake of the U.S. 9 industry, we urge you to make an affirmative determination 10 so that this investigation may go forward. 11 Thank you. 12 MR PRICE: Thank you. Our next witness is 13 Mr. Tracy Porter of Commercial Metals Company. 14 STATEMENT OF TRACY PORTER 15 MR. PORTER: Good morning. I'm Tracy Porter, 16 Executive Vice President of Operations for Commercial 17 Metals Company. In this capacity I oversee the operations 18 in the United States as well as our operations in Poland. 19 I also serve as chairman of the Steel 20 Manufacturers Association, which consists of 28 North 21 American Electric Art Furnace Steel Producers, including 22 the rebar producers here today. 23 I appreciate this opportunity to appear before 24 you to explain why trade relief against dumped and 25 subsidized Japanese, Taiwanese and Turkish rebar imports is Ace-Federal Reporters, Inc. 202-347-3700

28 1 critical to CMC and the U.S. rebar industry. 2 CMC is a global metals recycling, manufacturing, 3 fabricating and trading enterprise. Our corporate offices 4 are in Irving, Texas, but we operate at over 200 locations 5 in more than 20 countries around the world. Our global 6 operations give us a unique perspective on conditions in 7 the U.S. rebar market as well as rebar markets around the 8 world. 9 With this perspective and from my work with the 10 SMA, I can tell you that there is a broad consensus in the 11 industry that conditions in the steel market today are as 12 bad as they have ever been. This is a direct result of the 13 market distorting unfair trade practices of subject 14 imports. 15 In your many investigations involving this 16 product, you have heard subject producers claim over and 17 over again that their rebar does not compete with domestic 18 rebar. This was not true then, it's not true now. 19 I would like to take this opportunity to tell 20 you why. 21 It bears repeating that rebar is a highly 22 standardized product that is principally sold on the basis 23 of price. Rebar from the United States, Japan, Taiwan and 24 Turkey is all interchangeable and is very much used for the 25 same purposes and the same applications. Ace-Federal Reporters, Inc. 202-347-3700

29 1 There is nothing about this product or the 2 structure of the U.S. industry that insulates us, or the 3 well-being of our employees, from the harm caused by these 4 unfairly traded imports. 5 CMC and the rest of the domestic industry 6 compete with each other and with subject imported material 7 for each and every sale day in and day out. 8 As a larger company with affiliates at various 9 stages of the value chain, CMC is well positioned to 10 address a couple of valuable key points about competition 11 in this market. First, our transactions with our 12 affiliates are competitive and subject to market 13 conditions, just like a transaction with unaffiliated 14 customers. 15 Every CMC entity is an independent business 16 enterprise whose sole objective is to operate as 17 efficiently as possible and to capture as much profit as we 18 can. 19 We have integrated fabricators and distributors 20 in our business to gain additional profit in the 21 fabrication and distribution business, not to prop up our 22 rebar mills. 23 As a result, we sell rebar to our affiliated 24 customers at competitive market prices, just like we sell 25 to our unaffiliated customers. If we can match the best Ace-Federal Reporters, Inc. 202-347-3700

30 1 price available in the market, we get the sale. If not, 2 our affiliates, just like our unaffiliated customers, can 3 go out and buy the cheaper product on the open market, 4 including subject imports. 5 After all, our affiliates have to compete for 6 sales just like our mills do, in the open market and on the 7 basis of price. Even if we can force them to buy from us 8 at higher prices, they would lose sales downstream and our 9 business would take a hit anyway. 10 Next, our scrap recyclers do not insulate us 11 from competition either. We take pride in being one of 12 the largest scrap recyclers in the United States, and to do 13 so, we must run our scrap business at market conditions, as 14 market conditions dictate. 15 They may help to ensure some security of supply, 16 but we can't just use them to mitigate price pressures in 17 our downstream businesses. There is nothing they can do to 18 insulate our rebar mills from raw material price 19 fluctuations or competitions from imports. 20 Like rebar, scrap is an internationally traded 21 product that is bought and sold on the open market with 22 complete transparency and in competition with other 23 producers and consumers. We sell scrap to CMC mills at 24 market prices and we sell scrap to non-CMC mills at market 25 prices. Ace-Federal Reporters, Inc. 202-347-3700

31 1 As large purchasers of scrap from the United 2 States, the Respondents should be well aware of the fact 3 that these prices remain subject to the forces of global 4 supply and demand. 5 At the end of the day, sales of rebar is based 6 on three things: Price, price and price. Customers want 7 the best price they can get regardless of the source. 8 Nothing insulates us from unfairly traded imports. This 9 should be clear from the speed with which the subject 10 imports have flooded the market since dumped Mexican rebar 11 exited in response to the antidumping orders. 12 We have been competing with Japanese, Taiwanese 13 and Turkish rebar in all corners of the market, in all 14 lengths and sizes, for sales to all types of customers. 15 While we used to see imports mostly in shorter 16 lengths, especially 20-foot, we are seeing more and more 17 40- and 60-foot imports, and even custom lengths, eroding 18 our sales based even further. 19 We have been getting hammered with offers from 20 all three countries at lower and lower prices. At this 21 point, we just don't know if and when they will stop 22 falling. 23 CMC is proud to be an innovator in the rebar 24 market. We are a leader -- excuse me. 25 We were a leader with regard to micromill Ace-Federal Reporters, Inc. 202-347-3700

32 1 technology, and we continue to operate the newest mills 2 with the newest technologies. But continually to innovate 3 requires continued investments, and we have shareholders to 4 satisfy. 5 Our shareholders demand returns on their 6 investment. Following the 2014 antidumping and 7 countervailing duty orders and seeing some growth in the 8 market, we anticipated better market conditions and 9 invested in a second micromill in Durant, Oklahoma, as well 10 as an expansion of our Arizona facility. 11 If these unfairly priced imports keep flooding 12 the market, we don't see any way that we can earn an 13 adequate return on these investments. These investments 14 and the jobs they support are both at risk of disappearing. 15 From CMC entity -- every CMC entity from our 16 scrap yards to our fabricators competes in the open market, 17 and we compete with anyone, domestic or foreign, as long as 18 we have a level playing field. 19 On behalf of CMC, its workers and their 20 families, we urge you to recognize the harm caused by 21 dumped and subsidized rebar from Japan, Taiwan and Turkey 22 and to reach an affirmative preliminary determination. 23 Thank you. 24 MR. PRICE: Our next witness is Mr. Burke Byer, 25 president and CEO of Byer Steel. Ace-Federal Reporters, Inc. 202-347-3700

33 1 STATEMENT OF BURKE BYER 2 MR. BYER: Good morning. I am Burke Byer, 3 president and CEO of Byer Steel. First I'd like to thank 4 the Commission Staff for all of your time and attention on 5 the continuing damage caused by subject import rebar. 6 Byer Steel is a family owned and operated 7 business that manufactures rebar using 100 percent recycled 8 material. Byer Steel has been in my family for over four 9 generations, spanning more than 100 years. Our teammates 10 and myself are very proud of what we have accomplished. 11 We're located in Cincinnati, Ohio, employing 12 just a little over 80 teammates in our mill and fabrication 13 operations, down from 180 teammates not that long ago. 14 Unlike some of the other producers here this 15 morning, Byer Steel is a very small company. We make rebar 16 and only rebar. 17 We offer some rebar fabrication and other 18 services as well, but we depend on the ability to 19 manufacture and sell this product at a fair price to the 20 Midwestern market. 21 If we can't continue to sell rebar in the 22 Midwest like we have for over the last 100 years, I will be 23 forced to shut down these businesses. 24 We are already operating with just a single 25 crew, less than half of the workforce that I would ideally Ace-Federal Reporters, Inc. 202-347-3700

34 1 employ, and things would only get worse unless we get 2 relief from the latest flood of unfairly priced imports. 3 Since we were here last, the market gave us some 4 reason for optimism. Relief against dumped Mexican imports 5 helped. And there's been gradual recovery in the 6 construction market since the financial crisis. 7 Unfortunately, we aren't seeing the kinds of 8 benefits that we thought could accompany these 9 improvements. Instead, these benefits are being captured 10 by low-priced imports. 11 For the last year or so, at least since late 12 2015, I've been watching mountains of subject rebar growing 13 higher and higher on the docks, just nine miles from our 14 mill. This material comes to Cincinnati from Japan, over 15 6500 miles away, or Turkey, 5500 miles away. 16 This rebar comes upriver from New Orleans, gets 17 unloaded and sits there ready for sale at prices below our 18 cost. 19 It's almost like a second rebar mill in 20 Cincinnati just floated up the river one day with months of 21 inventory at lower prices. 22 Due to the fungible nature of rebar and that it 23 is a purchased 100 percent based upon price, the clients 24 that we've served for over 100 years have started buying 25 from Turkey and Japan, and on the river, with no Ace-Federal Reporters, Inc. 202-347-3700

35 1 hesitation. 2 If you've ever been to Cincinnati, you'd 3 understand that there is no good sushi in Cincinnati, yet 4 you can get all the Japanese rebar you want at prices 5 cheaper than we can make it. 6 These imports are pricing us out of the market, 7 and I mean completely out of the market. They have driven 8 prices so low that it's become difficult to buy rebar even 9 from our own mill. We've been forced to buy Turkish and 10 Japanese bar for both our fabrication and stock sales 11 because it just isn't price-competitive for us to make it. 12 I hate to do this because I know that it's 13 feeding our own demise, but after a while you have no 14 choice. 15 The premiums associated with different sizes of 16 rebar are nonexistent because the subject mills are willing 17 to sell in any size without premiums as if profit was 18 something of an afterthought. 19 We have nowhere to hide from these imports. 20 Since they have piled up relentlessly, they have forced us 21 to match our prices dollar for dollar. 22 At this point, we don't -- if we don't match the 23 import prices, we just don't get the sale, pure and simple. 24 But when we drop our prices, import prices just seem to go 25 lower and lower. Ace-Federal Reporters, Inc. 202-347-3700

36 1 Even with modest growth in demand, subject 2 imports have totally inhibited our ability to participate 3 in any of this. Imports are also keeping us from making 4 money on some of the other services that we traditionally 5 provide, like warehousing, same day or next day delivery. 6 Why pay us to do it when you know the material is being 7 stored at the docks for free, just waiting for you to send 8 a truck in to pick it up at prices that will get cheaper as 9 your truck drives to pick it up. 10 These conditions are not sustainable for my 11 company, and I may be out of business unless the industry 12 gets relief from these damaging low-priced imports. 13 We've already been forced to run on less than 14 half the work force that we would employ if we were running 15 at a full capacity. We've had to postpone millions of 16 dollars of important upgrades to our mill, and we've lost 17 long-standing clients as they suddenly switched over to 18 imports. 19 It's a scary position for us. Even when demand 20 seems to be improving a little bit, and this just will not 21 last forever, we have to cut price back even further to 22 unsustainable levels or cut production. You're out of the 23 frying pan and into the fire either way. 24 Our margins and our co-workers all suffer, 25 either way. Ace-Federal Reporters, Inc. 202-347-3700

37 1 Our pricing has dropped, our sales have 2 declined, and our profit margins have been decimated. 3 With our position right in the middle of the 4 country, it's terrifying that we're being undercut on basic 5 steel products by manufacturers that make these products on 6 the other side of the globe. 7 In short, if subject imports are allowed to 8 continue hammering our market, it would likely be 9 economically impossible for me to sustain and continue 10 producing rebar. I would have no choice but to close our 11 rebar facility and lay off our mill, fabrication, service 12 center and recycling employees. 13 Our 100-year-old family business would come to 14 an abrupt end. 15 On behalf of myself, my family, my teammates, 16 please understand, rebar is a highly fungible product, sold 17 on price and price alone. I ask that you grant trade 18 relief to domestic rebar industry, and I once again 19 appreciate your time and attention. 20 Thank you. 21 MR. PRICE: Thank you. Our next witness is 22 Mr. Roy Houseman of the United Steel Workers. 23 STATEMENT OF ROY HOUSEMAN 24 MR. HOUSEMAN: Good morning, and thanks for your 25 time this morning. I'm Roy Houseman, legislative Ace-Federal Reporters, Inc. 202-347-3700

38 1 representative for United Steel, Paper and Forestry, 2 Rubber, Manufacturing, Energy, Allied Industrial and 3 Service Workers International Union, commonly known as the 4 Steel Workers or USW. We are the largest industrial union 5 in North America, representing more than 1 million active 6 and retired members throughout the manufacturing sector. 7 Our members and their livelihoods depend on the 8 fair trade and enforcement of U.S. trade laws, so I'd like 9 to thank you for the opportunity this morning. 10 The Steel Workers strongly support these 11 petitions and urge you to allow these investigations into 12 dumped and subsidized rebar from Japan, Taiwan and Turkey 13 to proceed. The rebar industry is very important to our 14 union and its members. We represent workers in much of the 15 industry, including at Cascade and a number of Gerdau 16 facilities. These and other workers in the U.S. rebar 17 industry are the best in the world, but they cannot compete 18 against foreign producers that price unfairly and foreign 19 governments that subsidize their domestic industries. 20 This is exactly what we were seeing in the 21 subject countries. Our union and its members were 22 optimistic after the 2014 antidumping and countervailing 23 duty orders on Mexico and Turkish imports. We have seen 24 less harm from Mexican imports, but dumped and subsidized 25 rebar from Turkish producers have continued to pour into Ace-Federal Reporters, Inc. 202-347-3700

39 1 the U.S. market. 2 And yes, these are the very same Turkish 3 producers who told you two years ago they had no interest 4 in sending any more rebar over here. 5 Japanese and Taiwanese producers are now 6 flooding the market as well. As prices for these imports 7 just keep falling, none of them seem to be playing by the 8 same rules that we are, the rules that their government 9 agreed to. 10 The results are -- is that their workers keep 11 their jobs while ours suffer layoffs, reduced hours and 12 reduced pay. This is all happening at a time when it 13 seemed like the recovery in the construction market was 14 finally taking hold after the recession. 15 We saw modest growth in the construction demand 16 and employment last year. Since rebar demands tend to 17 track with construction demand, we thought our workers 18 in the rebar industry were well positioned to benefit. But 19 too much of this modest growth has been captured by 20 unfairly traded Japanese, Taiwanese and Turkish imports. 21 Instead of being able to increase sales and 22 production in response to better demand conditions, U.S. 23 mills last year lost sales to the latest surge in dumped 24 and subsidized rebar. Instead of being able to regain fair 25 market prices after the antidumping orders on Mexican Ace-Federal Reporters, Inc. 202-347-3700

40 1 imports, mills have been forced to slash prices to try and 2 stem the losses of sales volumes. 3 Things have been really bad this year. Profits 4 have fallen off dramatically and production remains 5 depressed. Capacity utilization of the industry has fallen 6 back to around 60 percent. 7 All of this means that our members are losing 8 their jobs. Those still working are facing reduced hours, 9 reduced pay, and the prospect of layoffs down the road. In 10 2013, Gerdau laid off USW members at the St. Paul, 11 Minnesota, facility and stopped making rebar there entirely 12 in 2015. They have also cut back at their Rancho Cucamonga 13 because of import pressure, pricing pressure. 14 There is a similar situation at Cascade, where 15 we recently lost dozens of jobs permanently because of 16 unfair competition with imports. Without relief, there is 17 no doubt that this will continue. 18 We've been fighting against unfairly traded 19 steel imports for years, and I can honestly say that the 20 problem is as bad as it's ever been. 21 Many foreign governments see this industry as a 22 political tool more than a competitive business. They 23 drive production well above demand, and the United States 24 is an easy target when they have nowhere else to sell. 25 Our economy is recovering, our markets are open, Ace-Federal Reporters, Inc. 202-347-3700

41 1 and our industry doesn't get endless handouts to keep us 2 afloat. It's not right that we have to compete against 3 producers that operate without regard for market 4 conditions. 5 We should not be putting Americans out of work 6 simply to provide foreign producers with a market for 7 dumped and subsidized imports. Neither we nor our members 8 have any problem with free trade, provided that it is fair 9 trade. 10 We are willing and able to compete with steel 11 industries across -- around the world, but we expect them 12 and their governments to abide by the same rules that we 13 do. 14 More importantly, we expect our government will 15 stick up for us and enforce those rules when they are 16 clearly being broken. Providing relief against unfairly 17 traded rebar from Japan, Taiwan, and Turkey would help to 18 ensure a level playing field in the U.S. market. On behalf 19 of the steel workers that make rebar, retirees that depend 20 on the health of the industry, and all of the communities 21 and families that they support, I urge you to make an 22 affirmative preliminary determination. 23 Our jobs and our members' jobs depend on this 24 investigation. Thank you. 25 MR. PRICE: Thank you. I would now like to turn Ace-Federal Reporters, Inc. 202-347-3700

42 1 to our presentation, our slide presentation, and I will 2 start and then Mr. Kaplan will follow me. 3 Start with legal issues. The petition 4 identifies all rebar as a single like product. The 5 Commission has consistently treated all rebar as 6 constituting a single like product. Rebar has the same 7 basic physical characteristics and uses, almost all of it 8 is being used in concrete. It is produced in similar 9 facilities. It is sold through the same channels of 10 distribution. It is interchangeable. It is perceived to 11 be a single like product, and it is all priced similarly. 12 Turning to cumulation, the Commission is 13 required to cumulate imports from the subject countries. 14 Rebar from all three countries is interchangeable, there 15 was an overlap in competition with imports from Japan and 16 Turkey, present in all regions and imports from Taiwan 17 everywhere but the northeast. 18 Subject imports were sold throughout the same 19 channel of distribution, including to fabricators. Imports 20 from all three subject countries were present throughout 21 the POI. Taiwanese imports entered the United States in 23 22 of the 42 most recent months and are consistently present 23 in the U.S. market beginning in 2015. This is consistent 24 with simultaneous overlap and presence found in a number of 25 recent flat rolled cases. Ace-Federal Reporters, Inc. 202-347-3700

43 1 With regard to negligibility, imports from the 2 subject countries are considered negligible if they account 3 for less than 3 percent of imports in the previous 12-month 4 period. The most recent complete import information is 5 through August of 2016. 6 All three subject countries accounted for 7 substantially more than 3 percent of imports during the 8 period of September 2015 through August 2016, so 9 negligibility requirements are easily satisfied. 10 We will now turn to Mr. Kaplan. 11 STATEMENT OF DR. SETH KAPLAN 12 DR. KAPLAN: Thank you. I am Seth Kaplan of 13 Capital Trade. I'm going to present an economic overview 14 of the case, beginning with to look at the trends in this 15 investigation. 16 Summary of my finding is that subject imports 17 increased both absolutely and as a share of both domestic 18 consumption and production, that subject imports undersold 19 domestic rebar and suppressed and depressed prices, and 20 that the surge in low-priced subject imports caused 21 material declines in the domestic industry's financial, 22 trade and employment indicia. 23 Let me begin by looking at the conditions of 24 competition. This is a product you've examined before. 25 The Commission has looked at the conditions of competition, Ace-Federal Reporters, Inc. 202-347-3700

44 1 the Staff has looked at the conditions of competition. So 2 let me go over those. 3 First, subject and domestic rebar are highly 4 substitutable. That is a quoted from the Commission 5 opinion in 2014. 6 If you need any more evidence, I would look at 7 the other recent opinions as well, and they're all 8 completely consistent on this point. This is a settled 9 issue. 10 Rebar is purchased on price. As you could see, 11 there are quotes from the Commission opinion of October 12 2014, the Commission opinion of July 2013, the Commission 13 opinion in December 2008. I think I did one of these cases 14 in 2001. Nothing has changed. Been there, done that, same 15 conditions, same product, same markets with small changes. 16 Demand for rebar is inelastic, once again, the 17 last three Commission opinions on this product have found 18 that changes in the price of rebar have a relatively small 19 effect on total demand for rebar. That's because rebar is 20 a small share of the final products which enter and rebar 21 has no good substitutes. For your economists, the Hicks 22 Four Factors all show that the demand is inelastic. 23 The demand for rebar in the United States 24 increased over the POI. These are charts that were found, 25 I believe, in the Staff report of the last investigation. Ace-Federal Reporters, Inc. 202-347-3700

45 1 They have been updated. So you have an increase in demand, 2 although in about the last 12 months, things have become a 3 little bit flatter than they were during the earlier part 4 of the period of investigation. Another condition of 5 competition that has been recognized that the demand for 6 rebar is driven by residential and nonresidential 7 construction, and there you see the data. 8 Another condition of competition in this 9 particular market is the inventory overhang of subject 10 rebar. Those are pictures of rebar on the docks. There is 11 a quote from American Metals Market very recently, October 12 6, 2016. "A major steel terminal in Houston is holding 13 some 160,000 tons of rebar inventory, which would last two 14 full months at current outflows of 160 trucks, or 3000 tons 15 per day, according to a fourth rebar trader who visited the 16 terminal last week." 17 What the Staff and the Commission understands 18 about steel inventories is that sometimes they do not 19 appear as domestic producer inventories or as importer 20 inventories, but rather are held in the distribution 21 channels. 22 So distributors or others are holding the 23 product and it doesn't necessarily show up in the data 24 because the purchasers and the distributors are not 25 importers or domestic producers, the two sources of Ace-Federal Reporters, Inc. 202-347-3700

46 1 inventory data in these investigations. 2 But there it is, and there's the quote, and 3 that's just one place. 4 So the Commission has seen this before, and now 5 they're seeing it again. 6 Subject imports compete head to head in 7 channels, lengths and regions. Another condition of 8 competition. The Commission has recognized that in no 9 uncertain terms in its October 2014 opinion. The 10 preliminary importers questionnaire show head-to-head 11 competition based on length as well. Census data shows 12 overlap of domestic rebar and subject rebar in the same 13 regions. This is a commodity-like product, the most 14 generic of the long products that is sold on price, it is 15 sold in all channels, it is sold in all lengths, it is sold 16 in all regions, it is head-to-head competition for its use 17 in reinforcing concrete. 18 Now let me turn to import volumes. Subject 19 imports increased absolutely. As a legal matter, it is 20 evident on its face from this chart. As an economic 21 matter, we'll see how large these volumes are and how rapid 22 the increase has been. This is particularly striking given 23 the comments made by Respondent in the 2014 investigation 24 of their lack of interest in the domestic market. 25 I think this contradicts any notion of their Ace-Federal Reporters, Inc. 202-347-3700

47 1 lack of interest. 2 Subject imports increased relative to 3 consumption. As you can see, subject import market share 4 went up. And as you can see from the nonsubject import 5 side, that they have taken share from both the domestic 6 industry and from nonsubject products. Some of that is the 7 Mexican imports exiting under the order, and they are 8 nonsubject. 9 The Turkish imports more than replace them. 10 Subject imports increased relative to production as well, 11 so in the first test of whether imports are significant, 12 they meet all three standards on a legal basis, and as an 13 economic basis, given the generic nature of the product and 14 the high degree of substitutability, these volume increases 15 are significant and injurious. 16 Let's turn to underselling. Subject imports 17 undersell the domestic industry, and the preliminary 18 questionnaires that we have compiled with over -- well over 19 100 comparisons, all but one show underselling, consistent 20 underselling. 21 The margin of underselling has increased over the 22 POI. Turkey had the largest underselling margins, although 23 all three countries undersold, with the underselling 24 margins increasing in 2015. And that is consistent with 25 the results you see about the decline in the financials Ace-Federal Reporters, Inc. 202-347-3700

48 1 that I'll show later. And this shows the problem is 2 getting worse, and this shows the problem is current injury 3 extending well over a year. 4 Past statements by Turkish Respondents are 5 contradicted by the current import surges and underselling. 6 You've seen these quotes mentioned earlier. 7 They are cited at the bottom. But the actual behavior of 8 the Turkish industry as well as the Japanese and Taiwanese 9 industry, belie any types of statements that they have no 10 interest in this market. 11 As Mr. Nolan opened in this forum, talked about 12 the U.S. prices being the highest in the world, and so this 13 is the market of choice. 14 Further, there is evidence of a cost/price 15 squeeze, which demonstrates price suppression and 16 depression. The industry experienced a cost/price squeeze 17 during the last 12 months, meaning that prices fell faster 18 than costs. Gross margins reached their lowest levels in 19 2016. I don't know if Mr. Nolan has had the time to 20 compile the questionnaires. Things come in at a very 21 ferocious state at this investigation. 22 But what you will find is that both the 23 operating margins and the net margins are lower than the 24 industry had in 2013 and '14, when the Commission found 25 material injury to the domestic industry. Things are worse Ace-Federal Reporters, Inc. 202-347-3700

49 1 now on a financial basis. 2 The benefits the industry experienced after the 3 2014 orders have dissipated. 4 I want to step back both from -- and address 5 both lawyers and both economists, I'm glad there's two of 6 each, and compare it to some previous cases and evidence 7 you see here. 8 The Commission has sometimes not found price 9 suppression and depression, because input costs are falling 10 as well as profits and prices falling. 11 I think you could distinguish that via the 12 cost/price squeeze. I think you could distinguish that 13 statistically, as we have done in other cases. But there 14 is additional evidence in this investigation that I think 15 the lawyers should be concerned of when they look at their 16 legal memo and the economists should be concerned of when 17 they write their chapter on pricing. There is direct 18 evidence from the purchasers on what affected prices. They 19 were asked. 20 I would ask you to look at the data. Do they 21 say prices fell because input prices fell or do they say 22 prices fell because we had to match the price of imports? 23 This data is different than data in past cases, and I think 24 this is exactly the type of direct evidence that the 25 Commission should find probative when determining whether Ace-Federal Reporters, Inc. 202-347-3700

50 1 there's price suppression and depression. Evidence in 2 addition to the evidence they had in the previous 3 investigations. 4 Now let me turn to the industry indicia. And 5 they show severe declines. Note the Commission found 6 injury in 2013 and '14, that the orders were put in. That 7 bar really goes in October 2014. And there were some -- a 8 little bit of earlier benefits from the final duties being 9 put in place. So you could see a slight increase from '13 10 to '14. 11 But what you really saw is when the orders came 12 in place and Mexico was taken out, that there was a really 13 big increase in the profitability of the domestic industry 14 in 2015. The surge in imports has dissipated that benefit, 15 and now the domestic industry is operating at a level below 16 that it did when the Commission found injury in 2013 17 and '14. 18 There is current injury in the industry starting 19 in 2015 with the import surge, lowering the profitability 20 and dissipating the benefits gained from the order. 21 Similarly, net income margins saw the same 22 pattern, and as you see, net income margins are actually 23 negative in this investigation. They are below, once 24 again, 2013 and 2014. And to the extent that there is 25 injury, there is a strong argument to be made for serious Ace-Federal Reporters, Inc. 202-347-3700

51 1 injury to this industry based on that, much less material 2 injury by reason of imports. 3 Similarly, U.S. production decreased over the 4 POI despite increasing demand. So you see a decline in 5 shipments in 2015, despite the order and rising demand. 6 Witnesses have testified is that they -- in an 7 effort to maintain prices, they gave up market share in a 8 rising market. That is evidence of injury from the 9 production side. 10 Also, because of that, the number of 11 production-related workers decreased, they are related to 12 the amount of output. Hours decreased because output fell 13 in 2015. 14 The industry has lost sales and lost revenues. 15 There's evidence not only of lost sales but also dropping 16 prices to compete with imports. There's factual evidence 17 of price suppression and depression in the lost sales and 18 lost revenues questionnaires, and those are the 19 questionnaires I was referring both lawyers and economists 20 to in determining whether there is evidence for the price 21 suppression and depression and determining in the pricing 22 section what facts should be included in discussing how the 23 pricing dynamics work. So I think both -- both the 24 attorneys and the economists would find this information 25 probative. Ace-Federal Reporters, Inc. 202-347-3700

52 1 Finally, let me summarize. The trade indicia, 2 output, sales and market share show injury. The financial 3 data is particularly weak and particularly injurious, given 4 the recent affirmative finding in the other case, that this 5 is now gone. The other indicia shows also signs of 6 material injury by reason of imports. 7 Quickly let me discuss the lagged effect of 8 imports. The Commission has seen this pattern before. It 9 has been put before them by economists and by industry 10 witnesses. 11 The U.S. government has recognized this as well, 12 that there could be lags from the imports to profitability 13 due to inventory accumulation, due to uncertainty of 14 continued import surges, due to a lag in the order book and 15 due to a lag in certain cases in contracts. 16 What this means is and what you see in the 17 pattern is that the domestic industry lost market share 18 while retaining profitability in 2015, and then as the lag 19 has an effect on prices and profits that they lost 20 significant profitability and had significantly lower 21 prices in the 2016 period showing another side of the 22 injury, first the effects on quantity and then the effects 23 on profitability. 24 Finally let me go through the threat factors 25 quickly. Likely to result in increased imports in the Ace-Federal Reporters, Inc. 202-347-3700

53 1 United States. Yes, as Mr. Nolan said, it's the 2 highest-priced market, and all those countries have excess 3 capacity. The rate of increase of volume is expected to 4 increase further. There is no reason to think it will stop 5 unless orders are put in place. Price suppression and 6 depression has occurred and the underselling has increased 7 and it could be expected to increase should orders not 8 occur. Inventories of the subject merchandise are on the 9 ground in the United States. Once again, they might not be 10 showing in the import and domestic producers, but they are 11 in channel and the Commission regularly sees that. 12 There's a potential of product shifting, to the 13 extent that foreign producers make more than rebar on their 14 mills. If they make rebar and merchant bar, for example, 15 they could switch to rebar production. They could also 16 shift from third markets to the United States as well, they 17 could also use excess capacity. All of those things 18 suggest and indicate that there's a threat. 19 There are countervailable subsidy allegations 20 being made as a factor, and there's likely to be material 21 injury given these imports. 22 So I think the evidence on the record shows that 23 the Commission could certainly reach a material injury by 24 reason of imports conclusion, as well as a threat of 25 material injury, that both findings are warranted by the Ace-Federal Reporters, Inc. 202-347-3700

54 1 record. 2 The U.S. is the preferred market for rebar 3 exporters has been set, that means there is a threat given 4 the excess capacity. 5 The conditions in the global market have deteriorated. 6 That means this is the preferred market. Imports are piled 7 high on the docks of Houston right now, and those piles 8 will increase both in Houston and in other ports should the 9 Commission not reach an affirmative determination. Thank 10 you very much. 11 MR PRICE: Thank you. And that concludes our 12 direct presentation. 13 MR. ANDERSON: Thank you, Mr. Price, and to the 14 panel, thank you for your testimony. It's been very 15 helpful. We would like now to take time to turn it over to 16 our staff for questions. And we'll start with our 17 investigator, Ms. Lo. 18 MS. LO: Hi. Thank you all so much for coming 19 and helping us understand this industry. I have a few 20 questions about the flow of imports. 21 Can you help me understand how -- how Turkey as 22 well as Japan and Taiwan, how they're able to cover the 23 transportation costs, given rebar is a fairly heavy 24 product? And also, in the case of especially Taiwan and 25 Japan, what's happening in their domestic markets, or Asian Ace-Federal Reporters, Inc. 202-347-3700

55 1 market, for that matter, that makes transportation costs 2 very -- not affected prices as much as they could? Thanks. 3 MR. CAMPO: This is Peter with Gerdau. I would 4 suggest to you that ocean freight is an oversupplied market 5 as well, and ocean freight rates are extraordinarily low, 6 have been extraordinarily low through this period. 7 Shipping from the Middle East to the port of Houston is 8 typically 15 or $20 a ton, so while it's a bulky material, 9 it's dense and there's plenty of capacity available in 10 ships running those directions. 11 So as a practical matter compared to overland 12 truck shipping, domestically in the U.S., it's a minor 13 cost. 14 MR. CANOSA: Marcelo from Gerdau. That is an 15 interesting question, and we try to figure out how can they 16 have a profit selling so far away and these prices here in 17 the U.S., so they are clearly underselling the market. 18 DR. KAPLAN: The transportation costs are 19 actually twice, because the scrap that is used to make the 20 product abroad is often shipped from the United States to 21 the foreign countries, where they then produce the product 22 and ship it back. 23 So even with the decline in transportation 24 rates, given the oversupply of the shipping industry right 25 now, they bear a double cost that is not borne in the Ace-Federal Reporters, Inc. 202-347-3700

56 1 United States to get it to the -- either at the mill in the 2 United States versus at the port for the imports on an 3 equal basis before it's shipped from there. 4 And this is the question that we asked in the 5 closed room, is the exact question. 6 What I think we'll see is that these firms are 7 dumping the product, we know already that the firms are 8 subsidizing the product, and we think that contributes to 9 their ability to both import the raw materials from the 10 United States and export the finished product to the United 11 States. But that remains to be seen from the Commerce 12 Department investigation. 13 MR. BARNEY: Don Barney, Nucor. To address the 14 second part of your question as far as the demand component 15 in Taiwan and Japan. Japan typically would export some 16 product into the Korean market, and we've actually seen 17 Korean demand on the decline. The other part of that is 18 that the global market has a severe excess capacity 19 situation in all products, particularly in rebar. So the 20 United States being a free market, open borders, everybody 21 looks to here as an export market for first and last 22 resort. 23 That's why we see the Taiwanese, Japanese and 24 Turkish material come in here at exceptionally high 25 quantities. Ace-Federal Reporters, Inc. 202-347-3700

57 1 MR PRICE: Alan Price, Wiley Rein. There's no 2 one I think appearing today for Japan. In every other 3 steel case I'm involved in, there's always a claim that the 4 Japanese products are somehow or other special. There is 5 no such thing as special rebar. Basically, if it sinks in 6 concrete, it works. If it sinks in water, it works. If it 7 sinks in cement -- well, it should be concrete. 8 Let's put the demand situation globally. This 9 is actually breaking news according to SBB, the World Steel 10 Association just issued its short range outlook and its 11 forecast, put this in perspective for everyone. And while 12 all of our politicians talk about growth rates in the 13 United States and whatever, let's look at what's going on 14 globally. 15 In the globe, the United States is a bright 16 spot. The World Steel Association today released its short 17 range outlook for 2016 and 2017. World Steel forecasts 18 that global steel demand will increase for this year, the 19 total increase will be by 0.2 percent in 2016, following a 20 contraction of 3 percent in 2015. And in 2017, the wildly 21 optimistic forecast -- sorry, that's not the written words, 22 those are my editorializing, is that demand for global 23 steel will increase by 0.5 percent. 24 So the market globally is oversupplied, Asia is 25 dominated by excess Chinese rebar exports, a lot of it by Ace-Federal Reporters, Inc. 202-347-3700

58 1 the way is not classified as rebar. There's a whole bunch 2 of tariff games that go on in China. 3 But the whole Asian market is flooded. The 4 Asian -- the Chinese, and I think one thing our Turkish 5 friends will agree on is that the Chinese have had massive 6 excess capacity flooding markets, our Turkish friends have 7 massive excess capacity. Some of their traditional Middle 8 East market has also been taken by Chinese product and 9 making it much more competitive for them. 10 Bottom line is the world is awash in rebar 11 capacity, and Taiwan and Japan, this is an attractive 12 outlet market, given how bad things are elsewhere. 13 MS. LO: Thank you very much, especially 14 touching on what's happening with China. 15 I just had also a technical question. In the 16 petition you cited trading companies. Is that the same as 17 distributors as a channel? 18 MR PRICE: So you often have trading companies 19 facilitating sales to distributors, sometimes they can be 20 the same, but often they're different. It starts to go to 21 a more macro sort of theological question, which is where 22 do you look at your underselling and so forth. And there's 23 a real argument that the underselling analysis, given 24 global logistics in the world, whether you look at steel or 25 anything else, should really now be FOB foreign plant to Ace-Federal Reporters, Inc. 202-347-3700

59 1 domestic plant. 2 In this case, it will make no difference because 3 there's massive underselling either way, but the points of 4 competition are really starting to shift over time in the 5 way markets work. 6 So there are trading companies. The trading 7 companies help facilitate the sales. A lot of the 8 distribution is different, I think it's fair to say, than 9 the actual trading companies. 10 Mr. Porter? 11 MR. PORTER: I would comment on that, because we 12 are global traders. The trading business is just that. 13 You're putting buyers and sellers together on a global 14 basis. Distribution often in the United States, 15 particularly because that's what I'm familiar with, is the 16 actual contact point between the trader and the customer. 17 The ultimate user, oftentimes it may be a distributor to a 18 distributor or something along that line. 19 One of the interesting developments in the last 20 year or year and a half has been, particularly with the 21 Turks, is that they are going directly to distributors as 22 opposed to going through the trading arm of it. We've seen 23 them actually bypass distributors and go directly to 24 fabricators now. 25 So they have cut the middleman out, so to speak, Ace-Federal Reporters, Inc. 202-347-3700

60 1 and are using that -- the dock, as you saw in the pictures 2 there, is basically their domestic steel mill. They supply 3 off the dock. It's readily available, and can be picked up 4 tomorrow if I placed an order today, I could pick it up 5 maybe this afternoon. 6 DR. KAPLAN: So just to kind of put a ribbon on 7 that, on page 15 of the presentation, the Commission found 8 that the subject imports compete head-to-head in channels, 9 lengths and regions. It's even more so than it was then 10 because of direct sales to distributors and direct sales to 11 fabricators. 12 So it was already intense at all levels, and now 13 it's grown even more so. Thank you. 14 MR. BARNEY: Don Barney with Nucor. Another 15 thing, just to kind of build upon what Mr. Porter stated, 16 as far as the imports coming in, historically, what you've 17 seen is there was a margin in there for the trader. Now 18 with the distributor being the actual trader as well, it 19 just goes direct into the channel. 20 So to your point, as far as looking at the cost 21 component of it, it just goes right in to the distribution 22 and fabrication channel, without another potential layer in 23 there. 24 MS. LO: Sorry. Thanks. So essentially the 25 trading companies have been cut out of business? Ace-Federal Reporters, Inc. 202-347-3700

61 1 MR. PRICE: I think it varies. I think it 2 varies. I think the trading companies still play roles in 3 a number of instances, and they do help facilitate a 4 significant portion of the transactions. But, again, 5 that's -- there is some shift going on in this product 6 line. And it's something that I think the Commission could 7 help gather data on in a final determination. 8 MS. LO: Thank you. I had a question to 9 Mr. Porter and Mr. Barney. Without divulging any BPI 10 information, I believe, those of you that stated that you 11 import also, could you help me understand what has happened 12 the last three years or so with your importing arms in 13 regards to the subject imports? How do you guys choose how 14 much to import, if the imports are so much cheaper than 15 making it? I know they operate as independent companies, 16 but how do you balance that? 17 MR. PORTER: We balance it basically in an 18 economic equation in that business unit. So in a given 19 market, there is bidding activity daily in the fabrication 20 business, literally daily. Not to purchase but to sell 21 fabricated product. 22 As a result of that, based on bid pricing that's 23 out there, you have to look at your raw material components 24 and do in some cases a blend, or in many cases, when you're 25 close to, for example, in Houston or any of the ports of Ace-Federal Reporters, Inc. 202-347-3700

62 1 entry, you have to go to a 100 percent usage of import 2 material to be competitive in the bid market. 3 So the -- many of the independent fabricators, 4 understanding that CMC, Gerdau and Nucor are less than 50 5 percent of the fabricated rebar market out there, we supply 6 less than 50 percent, there are a tremendous number of 7 independent fabricators. The independent fabricators 8 for the most part are buying imported material today. So 9 we have to compete with those folks, and in doing so, we're 10 not going to get the order on the fabrication side if it's 11 not competitive. You're bidding against an import price, 12 you have to have an import number or we lose money in that 13 segment. So we've had to go both ways. 14 I'd also say, too, that this notion of the buy 15 American thing, I spent many years in our fabrication 16 business, and buy American was buy American. 17 In the fabrication world, the price is the 18 price. They don't differentiate -- you know, well, you get 19 to charge me more because it's a buy American program. 20 That's a very small part of our book of business. 21 But more importantly, it's -- on bid day, 22 everybody is trying to get the order, and as a result, it 23 doesn't differentiate. 24 So we don't see any benefit of that. Not only 25 the buy American provisions in buy America and buy Ace-Federal Reporters, Inc. 202-347-3700

63 1 American, but we also see no benefit in the FAST Act. And 2 that's been a big point others have tried to make about the 3 protection the U.S. market has or U.S. producers. 4 The FAST Act is very slow in coming to market, 5 and we don't anticipate it's going to have any significant 6 impact. We just completed our business planning and just 7 started our fiscal year in September for this year. We 8 have no activity, nothing planned for fast money in other 9 business plan, to tell you how little impact that's going 10 to have. 11 So that notion that FAST money is going to help 12 us and protect us is just absolutely nonsense. 13 MR. BARNEY: He answered that very well. I 14 would just agree with what he had to say. And then any 15 additional information that we could provide would be 16 provided in the posthearing brief. 17 MS. LO: Thank you. I have one last question 18 before I turn it over. Mr. Campo had testified that two of 19 your facilities were sold to real estate developers; 20 correct? Did I hear that correctly? 21 MR. CAMPO: Yeah, that's right. Two mill -- 22 mills had been idled, previously producing rebar. Both to 23 be redeveloped for other purposes. 24 MS. LO: So they're not involved in rebar at 25 all. Thank you. That's all I wanted to clarify. Ace-Federal Reporters, Inc. 202-347-3700

64 1 MR. ANDERSON: Thank you, Ms. Lo. 2 And now let's turn the microphone over to our 3 attorneys, Mary Jane Alves and Mr. Laroski. 4 MR. LAROSKI: In the supplemental petitions, 5 petitioners explicitly added certain deformed wire. If you 6 could indicate whether you're aware of any imports of 7 deformed steel wire from the three subject countries and 8 from nonsubject sources as well. 9 MR PRICE: So for those of us -- there's 10 obviously history across multiple investigations here. 11 This is an issue that arose in the Mexican investigation. 12 In this investigation, we are aware of no imports from the 13 subject countries that are of that nature. 14 But we're trying to keep our scopes consistent, 15 and that's the reason for the amendment after discussing 16 this further with the Commerce Department, we've added that 17 explicit language. 18 MR. LAROSKI: Thank you, Mr. Price. And just so 19 I better understand the product, because I wasn't involved 20 in these past investigations, it struck me from the 21 selection of pricing products, that it was a very narrow 22 band of sizes that are selected for pricing, but the range 23 of sizes is much larger than that. 24 MR. PRICE: So maybe one of our folks in the 25 industry can also jump in. The overwhelming majority of Ace-Federal Reporters, Inc. 202-347-3700

65 1 both domestic production and imports are all in those 2 three -- four core sizes in the pricing products. These 3 are the same sort of pricing products that the Commission 4 has used. And I think you end up with this case having one 5 of the highest coverage rates in terms of domestic 6 production and import volumes of any cases I've been 7 involved in. 8 So I think they're very representative, and 9 again, it goes to the -- a high fungibility of these types 10 of products and the standardization of these products for 11 consumption. 12 MR. BYER: Burke Byer with Byer Steel, 13 Cincinnati. Traditionally, once again, my family 14 specifically has been in the rebar business in Cincinnati 15 for over 100 years, and for the last, say, 37 years that 16 I've been around, it was a -- once every year, maybe every 17 other year, you'd see a barge come up the river of very 18 limited sizes, 3s, maybe 4s, always in 20-footers lots of 19 times and just maybe 40 grade. 20 Today I'm being offered as we speak up through 21 sizes 11 and 60-footers and whatever grade you'd like to 22 make it to Cincinnati. The dynamics are unbelievably 23 different. They are -- they're doing all kinds of very 24 ingenuitive things to be able to make the commodity 25 products cross the region there. They are bending rebar to Ace-Federal Reporters, Inc. 202-347-3700

66 1 load it into vessels, and the barriers of product 2 flexibility are completely gone. 3 MR. LAROSKI: Pass the microphone. 4 MR. ANDERSON: All right. Thank you. I'm going 5 to turn it over it our economist, but just a quick 6 reminder, you're all doing a great job of identifying 7 yourself, but occasionally please remember to identify 8 yourself in case we're blocking the view of your nametags 9 for the court reporter. So now we will turn the microphone 10 over to Ms. Breaux and Ms. Burke. 11 MS. BREAUX: Good morning. This is Ms. Michele 12 Breaux, and I would like to first thank you for all coming 13 out here today. Your information is highly useful, and is 14 definitely giving me a better look at the rebar industry. 15 As a quick caveat before I begin, as the 16 economists, we usually get into business practices, so at 17 any point if it becomes uncomfortable and you don't want to 18 divulge BPI, just say we'll put it in our briefs and we can 19 move right along. 20 So to start out, as I was saying, this is my 21 first rebar case, so I want to make sure we're covering all 22 our bases when it comes to raw materials. 23 So we are looking at scrap prices, and we want 24 to make sure that that is the major raw material that we 25 should be looking at. And if there's any more, please let Ace-Federal Reporters, Inc. 202-347-3700

67 1 us know. 2 MR. CAMPO: Based on domestic production, that's 3 the most relevant raw material. On a global basis, there 4 are other -- basically you can produce rebar from iron ore 5 as well through the integrated process. We've seen more of 6 that in the last couple of years as China has pushed 7 exports of semifinished products, we call it billets, for 8 technical reasons they sometimes call it square bar. 9 And some of the subject countries are making use 10 of that as a semifinished good which they turn into rebar 11 and subsequently ship to the U.S. 12 MS. BREAUX: All right. My next question 13 regards to raw material. This was touched on a little bit 14 beforehand. But I want to know, how do raw material prices 15 affect the price of rebar? 16 MR. CANOSA: Marcelo Canosa with Gerdau. They 17 do affect price. Obviously, the number one, raw material, 18 cost that we have to produce rebar. But interesting 19 enough, if you follow the period of investigation, our 20 selling price in the market dropped even further than the 21 raw materials cost dropped from 2013 to recent month in 22 2016. Especially in 2016 you see a huge drop in what we 23 call metal spread, the difference between selling price and 24 the scrap cost. And that was primarily due to unfairly 25 trade imports from the subject countries that came in 2013 Ace-Federal Reporters, Inc. 202-347-3700

68 1 through '16. 2 DR. KAPLAN: Not to give an Intro to Econ 3 lecture, but -- Seth Kaplan, Capital Trade. 4 But, you know, there's -- the market price is 5 determined by supply drivers and demand drivers, and 6 certainly input costs and scrap prices are an important 7 supply driver, and every type of statistical work or 8 theoretical work involving this, you certainly would look 9 at that. 10 You also have the demand drivers, though. And 11 there's two general demand drivers here that are important 12 to look at. One is the overall strength of the market, the 13 end use markets, and the other is the subject products. 14 So if the demand in the overall market is 15 rising, it tends to push the demand curve out and cause 16 prices to go up. And if the imports are entering the 17 market, and in this case they're highly competitive and 18 highly substitutable, that would tend to push the demand 19 curve -- or minimize it and cause prices to fall, and shift 20 it away from the U.S. market and toward imports. 21 The Commission in the last cases have had some 22 confusion in trying to disentangle the effects of input 23 prices and the effects of the imports. And I would say 24 there's a couple things to look at here when you're looking 25 at that. Ace-Federal Reporters, Inc. 202-347-3700

69 1 The first is are prices falling at greater than 2 the input prices. You've just heard testimony that they 3 are. This is testimony from a witness who does this every 4 day about his firm. 5 But you can also look at the aggregate data, and 6 you can see that all input costs that go into the cost of 7 goods sold and the -- just the scrap prices, that prices 8 are falling faster than that, creating a cost price squeeze 9 and lowering both the spread and the gross margins. 10 Finally, you can look at the direct evidence of 11 what's causing prices to decline, and that is the surveys 12 of the customers. And they have indicated that the imports 13 are driving the prices down. 14 So I'm just trying to say this to help you 15 distinguish between the effects of the import prices and 16 the effects of the imports, because I think the Commission 17 has had some difficulty doing that in the last several 18 investigations regarding steel products. I'm trying to 19 give you a path to be able to disaggregate the effects of 20 the supply and demand side. 21 MR. PRICE: Alan Price, Wiley Rein. Let's go to 22 slide 25 in the handout for a second. Which is the 23 operating margin. It's not the gross margin chart, but 24 let's just go to that for a second. 25 You actually see tremendous -- or pretty Ace-Federal Reporters, Inc. 202-347-3700

70 1 substantial profit variations going on in this slide. 2 If it was just a constant raw material price 3 variation driving everything, if this was like, you know, 4 let's just say primary aluminum, where basically everything 5 is converted over the LME price plus, you know, primary 6 aluminum plus your finishing cost almost as a tolling 7 charge, you'd expect to see very, very constant sets of 8 profits and prices. And the spread over raw materials. 9 Here you're getting this variation, because 10 there's an enormous variation over raw materials. 11 So as Mr. Nolan tried to kind of implicitly 12 recognize, something else has to be causing this. That 13 something else are the underpriced imports. His version of 14 the world is somehow or other it's all domestic competition 15 and imports and domestic production in this highly 16 substitutable product somehow or other don't meet and 17 don't -- you know, don't compete with each other. 18 That's a fantasy. They do meet. They do 19 compete with each other. They have obviously had very 20 significant impacts on prices. That's price suppression, 21 price depression under the statute. 22 So while raw material prices have declined, the 23 fact that you have a complete crash in profitability and 24 this pricing occurred with huge underselling in a highly 25 substitutable product is a -- is a result of that injury Ace-Federal Reporters, Inc. 202-347-3700

71 1 and that causation. 2 MR. BARNEY: Don Barney with Nucor. To build on 3 that a little bit further as far as the injury component 4 side of things from 2015 and the pricing, we have so much 5 supply of the import from Japan, Taiwan and Turkey that 6 came in in the second half, that we were actually through 7 2015 cutting production, which again at the outset of the 8 statement that I had, we were actually affecting teammate 9 pay as a result of the imports coming in. 10 So you see the dramatic impact that it had. We 11 got into late in the fourth quarter and made a conscious 12 decision that we did not want to inflict any more pain on 13 our teammates, especially around the holiday season, we 14 need to get our market share back. 15 So we lost significant market share, made a 16 concerted effort to gain that share back through pricing 17 that was driven lower based upon the imports. And that's 18 what really created the situation. 19 Now, to build on that a little bit further, the 20 concern is, you know, we get into this situation where 21 we've got imports that -- you know, you look at the import 22 volume kind of diminished a little bit in the early portion 23 of the first half of 2016. That just gave them time to 24 figure out exactly what they needed to do to come back in 25 and undersell the market, this is a significant concern for Ace-Federal Reporters, Inc. 202-347-3700

72 1 us. 2 Because now they're back to underselling the 3 market, the import volumes are actually up through the 4 first nine months over the 2015 period, and we don't see 5 this diminishing whatsoever, subsiding whatsoever. 6 MR. PORTER: The other thing I might add to that 7 is that I've been doing this for 26 years, and this is 8 really, to me, in many ways the perfect storm, except we're 9 the ship being battered at this point. 10 When you have the opportunity, for example, with 11 raw material input costs that you're talking about falling, 12 I've never in my career seen the finished bar price chase 13 it and pass it up. 14 Some of the pricing decisions that I've been 15 personally involved in, in terms of direction of our 16 company over the last year, have -- they're really 17 unprecedented, and it's really very difficult to sit here 18 and understand what is going on. 19 I think I'm a fairly intelligent person, and I 20 can't understand what's going on in the minds of many of 21 the subject import countries. But what I do understand is 22 that we see a degradation of our business unlike I've ever 23 seen before in this product. And these decisions are 24 tough, because it -- we've had to curtail production. It's 25 the balance between price and volume. Ace-Federal Reporters, Inc. 202-347-3700

73 1 And steel mills like ours -- for example, our 2 investment in Oklahoma that we committed to our 3 shareholders is $250 million. This is, and I can give you 4 with absolute assurance, the lowest-cost production 5 facility on the planet today. In Arizona. And this will 6 be a replication of that. And we can't even begin to get 7 close to these numbers. 8 So we buy the same scrap they're exporting out 9 of the United States, converting and bringing it back. We 10 know our utility costs in the United States in terms of 11 energy is lower. Labor is not even a component really 12 today in terms of the cost of production of steel. It's 13 our fifth or sixth cost item. 14 Some of this is business proprietary, but I'll 15 tell you that that's not much different than any of our 16 competitors sitting at the table here. 17 So this notion that there are lower input costs 18 for the foreign producers are absolutely absurd. All we 19 can ever conclude at this point in time is that these 20 are -- you know, they're dump products, and that they are 21 underselling our product. And when you see prices -- the 22 response was the U.S. producers lower their price, the 23 response is to go lower. That tells me there's one 24 strategy in mind, that's to gain market share and displace 25 the U.S. producers. So -- Ace-Federal Reporters, Inc. 202-347-3700

74 1 MS. BREAUX: Are all right. Thank you very 2 much. This is Michele Breaux again. I'm moving on to 3 demand. 4 Dr. Kaplan, you spoke to construction obviously 5 would be one of the biggest indicators of how demand is 6 going. Is there anything else we should be looking at as 7 far as the demand for rebar? 8 DR. KAPLAN: Yeah, I mean, looking at the panel, 9 it reinforces concrete. Concrete is used in roads and 10 bridges. And nonresidential construction and some 11 residential construction of multifamily housing. 12 So it is, in essence, a construction product. 13 If anyone wants to add anything to that, feel happy to. 14 MR. PRICE: Yeah. Nothing has really changed 15 here. There's no revolutionary new uses. So -- so there's 16 some very insignificant amounts that go into mine roof 17 bolts and some really odd little things here and there. 18 As Commissioner Daniel Pearson once -- former 19 Commissioner Pearson once reminded me in his claim to be 20 able to use any product he's ever -- that was ever before 21 the commission in his era, he used them to help support 22 tomato plants. But that's about it. 23 I don't submit people generally buy rebar that's 24 a major demand item. 25 MS. BREAUX: All right. Michele Breaux again. Ace-Federal Reporters, Inc. 202-347-3700

75 1 And so this is -- this next issue has been touched on, but 2 I really want to kind of suss it out a little bit more. 3 Buy American, it was mentioned by both sides, 4 one side saying it's more important than the other. But I 5 wanted to kind of see how -- what role does it actually 6 play? Because some of you mentioned that you don't even 7 know that buy American is in play when you're trying to 8 make a sale. 9 MR. PORTER: Tracy Porter with Commercial 10 Metals. Twofold. 11 An independent rebar fabricator is not going to 12 tell you what he's bidding on. He is going to order rebar 13 and give you a price that he feels is a fair price to meet. 14 Oftentimes in our case, it's meeting an import price, to 15 get the order, we've got to meet it. 16 So the notion that there is some high visibility 17 to buy America or buy American is absolutely absurd. Now, 18 within our company, oftentimes we know that. But -- and 19 all that happens really is that you cannot use foreign bar 20 on that job. 21 But let me give you the practical side of it. 22 If I have contractor ABC and they are bidding a job, you 23 may have multiple contractors -- or suppliers bidding that 24 same project. You can't -- they will not tolerate -- and I 25 can give you absolute assurance, nobody is going to Ace-Federal Reporters, Inc. 202-347-3700

76 1 tolerate you coming in and saying oh, we know this is a buy 2 American job so we are going to raise your price. 3 They bid just like we do, on bid day it's the 4 low price that gets the job. So there is no bifurcation, 5 if you will, of the pricing in the marketplace. A lot of 6 it we're unaware of. Sometimes we are aware. But that 7 doesn't allow us to charge a different price. It's as 8 simple as that. 9 And anything that -- anybody knows anything 10 about the construction industry will tell you that those 11 guys are as aggressive and vicious as it gets on bid day. 12 So to try to add a premium for domestic use, it doesn't 13 happen. 14 MR. CANOSA: I'll second Mr. Porter. We don't 15 know when it's a buy American project or not. The 16 customers buy for their stock and replenish their stock. 17 In addition to that, buy American is an insignificant part 18 of the business related to rebar, unfortunately. 19 MR. BYER: Burke Byer from Byer Steel in 20 Cincinnati. The question is very poignant and simple and 21 we appreciate it. I think the smell test would be we 22 wouldn't be here if that was a benefit for us. And as a 23 very close friend of mine just told me a few weeks ago who 24 owns a large residential construction company in Cincinnati 25 that has over 62 percent of the residential construction Ace-Federal Reporters, Inc. 202-347-3700

77 1 permits in Cincinnati and Columbus, he has a model called 2 the American Standard -- and I asked him, I said so is all 3 of the products in that home model American products? 4 And he says I don't know, I don't care. And I 5 said, well, what about the rebar? And I said is it going 6 to help me raise the price on that house? 7 I said I don't know. And he goes, no, it won't. 8 Does not matter. 9 And I know where he's buying his rebar, and he 10 is buying foreign rebar that's going into all his homes in 11 the Midwest. 12 MS. BREAUX: And just to follow up, and this 13 might be something for your briefs, if you can estimate -- 14 I know some of you said it was a very small percentage. If 15 you can give us what do you think the share of the market 16 is, that would be great, as best you can. 17 MR. PRICE: Alan Price for Petitioners. We will 18 do that. 19 MS. BREAUX: All right. So moving back into 20 more basic questions about the industry, just to make sure 21 that I have this correct. So what role do distributors and 22 fabricators play in the market, and are there -- what 23 percentage of the market is made up of companies that play 24 both the distributor and fabricator role? 25 MR. CAMPO: It's Peter Campo with Gerdau. In Ace-Federal Reporters, Inc. 202-347-3700

78 1 very rough terms, in round terms, probably three-quarters 2 of the rebar that's consumed in the U.S. goes into a formal 3 project of some kind, construction project of some kind, 4 that's identifiable, a large project. That would be done 5 by a fabricator, and virtually all those fabricators do 6 both buy America work and not buy America work. As Marcelo 7 said, they simply buy rebar into their inventory, they 8 track it into the right projects, but they use price 9 competition for both of them on the purchasing side. 10 In terms of what role distributors play, many or 11 most of the fabricators also function as distributors, and 12 larger distributors, master distributors, distribute to 13 construction products, retailers or wholesalers throughout 14 the country, on roughly the other 25 percent of the volume 15 that doesn't go into large-scale significant projects. 16 MR. PORTER: Tracy Porter. Let me give you a 17 great example of how a distributor works versus a 18 fabricator. As Peter said, fabricators often will 19 distribute product as well as -- these will be for 20 contractors coming in to buy rebar for example on a 21 sidewalk on a project that they are doing, typically 22 20-foot or 40-foot lengths. 23 Where the distributor fits into the market, and 24 I call them the independent distributor who is kind of 25 unaffiliated with anyone, these are the guys that the Ace-Federal Reporters, Inc. 202-347-3700

79 1 mom-and-pop, hardware stores and lumberyards around the 2 country, that they distribute to. These customers are 3 typically too small because they buy two or three bundles 4 of a certain product, less than truckload quantities. 5 What we describe in our business as milk runs. 6 They operate milk runs where they will go out and 7 distribute or drop off product to eight or 10 customers in 8 a given day. So as customer A calls in and says, I need 9 two bundles of rebar tomorrow to replenish my stock, this 10 guy will aggregate that with, you know, others that are 11 doing the same thing and go out and deliver. 12 So that's the role of the distributor. He 13 services some of the smaller customers in the marketplace. 14 DR. KAPLAN: I'd like to point out briefly what 15 Mr. Campo said regarding the way fabricators operate. 16 Possibly to we could all understand the buy America issue. 17 If the fabricator is buying for their own 18 inventory, they know they're going to have multiple jobs, 19 and so they just want stuff in their yard. 20 So the person selling doesn't know which project 21 it's going to, and it might very well be the person buying 22 doesn't know which job it's going to, and knows it's going 23 to have to have some American stuff, if there is a buy 24 American job among the many jobs they're doing. 25 But they're keeping their yard stocked, and I Ace-Federal Reporters, Inc. 202-347-3700

80 1 don't even know if they know in advance which pile they're 2 pulling the rebar from to make that particular contract. 3 Is that correct? Could you -- 4 MR. CANOSA: Marcelo Canosa. That's correct. 5 MR. CAMPO: Yeah, Peter Campo, Gerdau. I would 6 only add they have an obligation under buy America to have 7 traceability of the material that goes into a job that has 8 those requirements, and they can do that. Essentially they 9 can track down to the bundle and bar level what the source 10 of the material was, whether produced in America or 11 elsewhere. 12 DR. KAPLAN: Seth Kaplan. When it's being 13 bought, it's not like there's the buy America price list 14 and the not. And you can see how this -- while the product 15 is segregated in the yard, you could see how it's in 16 essence commingled, depending on the job. So that -- 17 that's another mechanism by which you can't distribute in 18 the Buy American side. 19 These guys don't know what they're selling for. 20 Sometimes the other guys don't know what they're buying for 21 specifically. It doesn't create a type of environment 22 where you can price-discriminate, especially when the 23 purchaser doesn't want that to happen. 24 MR. BARNEY: Don Barney with Nucor. Just one 25 other clarification on the distribution side. The Ace-Federal Reporters, Inc. 202-347-3700

81 1 distributors do sell the mom-and-pop operations, but we 2 also see them selling more into the fabrication channel. 3 So there really is no delineation on where their product 4 will flow into. 5 MR. PRICE: Alan Price, Wiley Rein. Just going 6 to the last page on your slide deck, 38, this was actually 7 taken outside of Inbesa, which is the main dock in Houston, 8 port. You can find similar products across the United 9 States here. 10 Curiously, there's no inventory being maintained 11 by imports or very little in this record. Last time we saw 12 that by the way was in the 2001 rebar case, where we had 13 almost identical pictures of hundreds of thousands of 14 tons on the dock in Houston, and yet Mr. Silverman at the 15 time said it was all phantom inventory. 16 This is held, we assume, by distributors, okay. 17 It then gets sent to fabricators. It's just an accounting 18 question and how it goes into the market and how it is or 19 isn't picked up in your questionnaires. 20 So they're just -- you know, the channels are 21 very commingled. They're different in the sense that some 22 guys are principally distributors, some guys may be 23 principally end users. But they're -- a number of 24 operations do both, and even ones that are -- people think 25 of as -- purely as a fabricator will still distribute, and Ace-Federal Reporters, Inc. 202-347-3700

82 1 people think -- who are purely distributors often have some 2 fabrication in it. And it is what it is. 3 MS. BREAUX: Michele Breaux again. You spoke 4 about this earlier, and I kind of wanted to get more of an 5 estimate of what percentage of the imports coming in is 6 made up of fabricators and distributors directly importing. 7 That might be something you can leave for later on. 8 MR. PRICE: We'll address that in the 9 posthearing brief, but it is -- evolves, an evolution more 10 and more in the marketplace that is going on. 11 MS. BREAUX: Next question. This again is a 12 basic one about the product. Because it has been mentioned 13 here that a lot of rebar is being held in inventory on 14 docks. How long can it be held there? Is it -- I mean, I 15 assume a long time but I just want to kind of -- 16 MR. CAMPO: Peter Campo, Gerdau. It's a 17 nonperishable product. It can sit there literally years if 18 it needed to. 19 DR. KAPLAN: And this is -- I'm sure you should 20 be speaking with the industry expert, but there is, I have 21 heard argued for certain purposes, there is some benefit to 22 rust in some occasions. So this is -- this stuff is not -- 23 there is certain sealed rebar, but this is -- this is a 24 product that has that kind of gnarling on it, and the idea 25 is it sticks to the concrete and reinforces it. Ace-Federal Reporters, Inc. 202-347-3700

83 1 And so the -- there's no physical nature that 2 you observe, it's not the outside of a car door or 3 refrigerator. And the actual properties that make it -- 4 make it work aren't affected by it being outside. 5 MS. BREAUX: We're finished, thanks. 6 MR. CANOSA: I just wanted to add something 7 related to the inventory at the port. Most ports allow 8 90-day free storage, and sometimes well beyond that. So 9 they use those ports as their distribution centers to the 10 market. 11 MS. BREAUX: Thank you. 12 MR. ANDERSON: Thank you, Ms. Breaux. Now 13 Mr. Boyland. 14 MR. BOYLAND: Good afternoon. I've already sent 15 the companies follow-up questions and I appreciate your 16 time considering and responding to those. I have a few 17 questions here, which I don't think are BPI. 18 In terms of related scrap supply, what are the 19 primary advantages of having a related scrap supplier? 20 MR. PORTER: Tracy Porter with Commercial 21 Metals. 22 Ours is the evolution of the company as much as 23 anything. I mean, our company started 100 years ago, and 24 we were a scrap company in the beginning. It wasn't until 25 the 40s that we got into steelmaking. Ace-Federal Reporters, Inc. 202-347-3700

84 1 But the assurance of having a supply, the market 2 does ebb and flow, and as prices move up and down, it does 3 constrain supply at times. And also at other times, 4 there's excess supply. 5 So it's basically just an integration tool for 6 us. 7 MR. BOYLAND: Would the other companies concur? 8 MR. BARNEY: I would concur with that. It just 9 sort of smooths out the supply chain when you need it, it's 10 there. 11 MR. CAMPO: Yeah. Peter Campo, Gerdau. Very 12 much the same. It's surety of supply. You can have a 13 little more diversity in terms of the types of grades that 14 we might use and that can change over time depending on the 15 individual economic values of various grades. But for all 16 intents and purposes, in an oversupplied market, and the 17 scrap market is very much oversupplied today as well, it's 18 really just a convenience as to when we buy and how we hold 19 material. 20 MR. BOYLAND: And this -- I did have follow-up 21 questions that are sort of touching on this, again to the 22 extent that you could comment now. The way it was 23 described, these scrap operations are business units 24 generally. Is it fair to say that the prices being charged 25 to the rebar mill is fair market value? I mean, Ace-Federal Reporters, Inc. 202-347-3700

85 1 essentially it's a market price? 2 MR. BARNEY: Yes, Don Barney with Nucor. With 3 scrap being a globally traded commodity, we sell scrap or 4 scrap gets exported out of the country. So yes, it's sold 5 at fair market pricing. 6 MR. BYER: Burke Byer from Byer Steel. I can 7 speak from an outsider standpoint that I sell scrap 8 products to all of their mills, and they have supply scrap 9 operations that supply those operations. So it's a 10 market-based pricing decision by their mills. 11 MR. BOYLAND: Thank you. With respect to the 12 fabricator operations, this is sort of a similar question. 13 The fabricators themselves are charged -- is it fair to say 14 it's a fair market value, it's a market price? 15 MR. PORTER: This is Tracy Porter with 16 Commercial Metals. Yes, it is. It is a formulaic based on 17 our outside customer sales to what goes into our price that 18 we charge our internal customers. 19 MR. PRICE: Alan Price, Wiley Rein. Again, you 20 were touching on proprietary -- 21 MR. BOYLAND: Again, if touching on anything, 22 I'm happy to hear -- 23 MR. PRICE: This was extensively analyzed in the 24 last investigation, and the Commission concluded that it 25 essentially was market-based pricing. So we -- so we can Ace-Federal Reporters, Inc. 202-347-3700

86 1 review all of it again but -- 2 MR. BOYLAND: Again, I did have a few follow-up 3 questions which I think sort of touch on that, so the 4 detail would be helpful. 5 I think one of the other questions, just as a 6 general matter, the fabricators themselves, are they 7 captive in any sense in terms of they're expected to buy 8 from the mill, unless they have to buy from another source? 9 MR. BARNEY: Just like any customer, we have to 10 earn the right to supply them by providing a competitive 11 price. But we would like them to buy from us, but they are 12 not required to buy from us. 13 MR. PORTER: The way I -- Tracy Porter with CMC. 14 The way I describe it in the company is you can create 15 false economies, and if the scrap moving to our customers 16 and our product coming out of our mills to our fabricators 17 is not transacting at market prices, we really put 18 ourselves in a lot of peril. 19 So absolutely, they have the choice of who they 20 select, and oftentimes it's not our own mills. It's buying 21 subject imports. 22 DR. KAPLAN: As an economic matter, if the 23 markets are all competitive, there's no benefits. So if -- 24 and the fabricator market has many, many, many participants 25 in each area. It's a very competitive market. Ace-Federal Reporters, Inc. 202-347-3700

87 1 The scrap market, as you heard, is a worldwide 2 competitive market. It's not local. It's not even U.S. 3 It's worldwide. 4 And the rebar market, well, it's worldwide 5 market that's oversupplied in a competitive market. 6 So there's -- there's no advantage of figuring 7 out where you could take the profits or take even more. 8 You can't at any phase, because at every single level, 9 you're dealing with a very competitive market, at the scrap 10 level an international one, at the rebar level an 11 international one, at the fabricator level whether it's 12 local or national, all very competitive. 13 So that kind of -- you're asking the question of 14 how they operate. I'm looking at it from a market 15 perspective. It's kind of the ways they have to operate. 16 MR. BOYLAND: One other just final question on 17 the fabricators, to what extent there would be sort of an 18 indirect benefit, or not a benefit, but logistically the 19 costs are lower to sell to a related supplier or related 20 purchaser? I mean, is there anything to that, I mean, to 21 the extent that, you know, having a related supplier being 22 the purchaser, does that have any advantage in terms of 23 volume or logistics? 24 MR. PORTER: Tracy Porter with CMC. You know, 25 it really doesn't. Obviously you saw in the data that what Ace-Federal Reporters, Inc. 202-347-3700

88 1 has happened to us in late '15 and '16 in terms of the loss 2 of that volume on the mills, if there was a benefit, you 3 know, it would have certainly shown up there. 4 But again, we operate these things as 5 arm's-length transactions. And as a result -- I'll give 6 you an example. You're asking about scrap, and what Seth 7 was hitting on, I would tell you in the Houston market 8 alone, in terms of scrap operations, there are probably 9 well over 100 scrap dealers in the Houston market. So that 10 market is very -- you know, you don't get an advantage over 11 the competition or vice versa. It is you have to pay 12 market prices to get the volumes that you require. 13 Rebar is no different. There are multiple 14 fabricators, independent fabricators, in every one of these 15 cities that CMC operates in. So we're competing against 16 not only people sitting at this table, but we're competing 17 against independent fab indicators as well. There's nobody 18 that has a corner on the market so to speak anyplace, 19 either in scrap or fabrication, I'm aware of. 20 MR. BOYLAND: Thank you. And shifting gears, on 21 a cost side, in terms of the volume impact on COGS, could 22 you describe how that impacted cost of goods sold? The raw 23 material part is pretty straightforward. But on a volume 24 side, how were costs impacted by production volume? 25 MR. PORTER: Tracy Porter with CMC. Any large Ace-Federal Reporters, Inc. 202-347-3700

89 1 manufacturing heavy capital-intensive business, obviously 2 volume has impact in terms of the cost. Volume is 3 important to us. 4 What you've seen is we're all suffering because 5 of that lack of volume. 6 So yeah, I think some of this is kind of 7 business proprietary on our part, and what the direct cost 8 is of lower production levels. 9 But you can imagine if you were, you know, a 10 bakery and you're used to selling 100 cakes a day and you 11 go down to 50 cakes a day, something is going to have to 12 give. And in cases of some of our peers sitting at the 13 table there, this has been people going away, mothballing 14 facilities. We've had to rationalize capacity within our 15 own company in the last two years and take this product off 16 of some mills because there just was no market to take it 17 to. 18 MR. BYER: This is Burke Byer from Byer Steel in 19 Cincinnati. There's actually, in our little world, there's 20 a negative curve cost point as volume decreases. Your 21 biggest costs are raw materials. After that is maintenance 22 and MROs, your roles, all these big things that are eating 23 themselves alive all day long. And everything about 24 running a steel mill, it likes to see continual work, it 25 wants to get up and run and not be stopped. Ace-Federal Reporters, Inc. 202-347-3700

90 1 When you stop it, it becomes very disruptive to 2 all of these mechanical parts. Beyond truly the first 3 pain, which is having to let people go that did nothing 4 wrong, and put them on the street without a job, after 5 that, the operating costs per unit go up in a very negative 6 curving manner, so it's a challenging point. 7 MR. BOYLAND: Okay. So I mean, that's a fair 8 point. When I look at the change in production volume, 9 sales volume, we're going to see a corresponding impact on 10 costs simply because of, you know, reduced utilization. 11 One of the points that I think was raised in the 12 opening testimony, and this again may get to business 13 proprietary information, so you don't have to answer it 14 here, but we are seeing differences in financial 15 performance. What would those be -- what reasons would be 16 explaining that? I mean, why would one company be 17 performing differently, I mean, when we're talking about a 18 commodity product that's rebar? What would be important to 19 consider? 20 MR. PORTER: Well, since none of us are privy to 21 the information you see, it's pretty hard to comment. 22 MR. BOYLAND: Exactly. 23 MR. PORTER: So that would be speculation on our 24 part. And I would say that our attorneys would provide you 25 that though. Ace-Federal Reporters, Inc. 202-347-3700

91 1 MR. BOYLAND: It was sort of my segue to say 2 that's a very difficult question to ask directly either 3 way. But that is kind of a -- I think an important point, 4 to the extent that it could be further elaborated. 5 I think some of my questions follow up, did get 6 to that, to some extent. But -- 7 MR. PRICE: We'll address that in the post 8 conference briefs. 9 MR. BOYLAND: Thank you. Thank you. 10 One final question. In terms of the rebar 11 profile, the companies are indicating that we're all 12 selling about the same profile of rebar. Is that a correct 13 interpretation, that essentially, it's the same product 14 mix? 15 MR. CANOSA: Marcelo Canosa. That's correct. 16 MR. BOYLAND: I know there's going to be some 17 variation company to company. 18 MR. PORTER: What are you describing as profile? 19 MR. BOYLAND: I guess the size ranges. 20 MR. PORTER: Oh, yes. We all produce the same 21 grades, the same sizes, same lengths. 22 MR. BOYLAND: So none of the U.S. producers here 23 would sort of stand out in terms of a particular type that 24 they specialize in? 25 MR. PORTER: No. Ace-Federal Reporters, Inc. 202-347-3700

92 1 MR. PRICE: There are -- a very small portion of 2 this market is coiled, for example, and not everyone has 3 coiling facilities. But it's a very, you know, small 4 portion of the total. 5 MR. BOYLAND: So there would be some at the 6 margin? 7 MR. PRICE: You're looking at the fringes at the 8 margins of differences. But again, actually, the pricing 9 data goes to show, and some of the other data sets the 10 Commission has collected on sizes and on length show, this 11 is, you know, one of the most overlapped markets you can 12 see in terms of domestic production capabilities. There's 13 not a lot of distinction between facilities. 14 MR. BOYLAND: One final question. 15 I'm sorry, if you were going to -- Mr. Campo? 16 MR. CAMPO: Peter Campo, Gerdau. I think I can 17 safely say for anybody here, if we thought there was an 18 exploitable niche somewhere, we would have certainly gone 19 and found it. So to the point -- the point taken, we 20 literally all produce the same material in the same sizes 21 and same lengths and same grades. 22 MR. BOYLAND: Thank you. One final question, 23 kind of a miscellaneous. Do the companies use steel rebar 24 futures? Are there -- is that an active market? Was it 25 ever an active market? Because I think there was some push Ace-Federal Reporters, Inc. 202-347-3700

93 1 in '08, and it may not come to anything. 2 MR. CAMPO: Peter Campo, Gerdau. We do not. 3 There have been various market development efforts to try 4 and introduce futures anywhere but outside China, I think 5 there is probably a liquid market in China. But as far as 6 I know, none of us participate in it, nor is there 7 materially any market for futures outside of China that I'm 8 aware of. 9 MR. BOYLAND: So none of the U.S. producers 10 participate in it, and if -- to the extent it does exist, 11 it's primarily a Chinese phenomena? 12 MR. CAMPO: I can tell you we do not. I'll let 13 the others speak for themselves. 14 MR. BARNEY: Don Barney with Nucor. We do not 15 either. 16 MR. PORTER: CMC does not. And I wasn't even 17 aware there was a China futures market. But it's been 18 attempted many times in the U.S., to do it, but it just 19 hasn't gotten any traction. 20 MR. PRICE: Despite -- so despite very 21 significant fungibility in the products, it's -- I would 22 say the lack of a future market is because there are 23 different grades, different sizes and -- going on there, so 24 in fact, it is not technically a commodity. And so it is 25 -- there were attempts to try to do it. It has Ace-Federal Reporters, Inc. 202-347-3700

94 1 consistently not succeeded in the Western world. 2 One question, there is -- there are futures 3 offered on the SHFE exchange. I'm not sure whether it's a 4 very well -- robust market at all at this point in time. 5 MR. BOYLAND: Thank you. One final question 6 again if we're talking about derivatives and hedges. On 7 the cost side, do you have any mechanism for hedging scrap? 8 Is there any -- 9 MR. PORTER: No, I'm not aware of any in the 10 ferrous scrap, which is what we consider -- no hedging 11 mechanisms. There are hedging mechanisms in nonferrous 12 products but not in ferrous. 13 MR. BARNEY: I would agree with that. We don't 14 use any hedging instruments within the rebar market or 15 within any of it. So no hedging that I'm aware. Don 16 Barney with Nucor. 17 MR. CAMPO: Peter Campo, Gerdau. Same for us. 18 MR. BOYLAND: Thank you. I appreciate your 19 testimony. 20 MR. ANDERSON: Ms. Taylor and Mr. LaRocca, your 21 turn. 22 MS. TAYLOR: Good morning, Karen Taylor, the 23 Office of Industries. First I want to thank everyone for 24 coming and providing testimony. We realize that you're 25 busy people and this is time out from your work, so we do Ace-Federal Reporters, Inc. 202-347-3700

95 1 appreciate your coming here to answer my questions -- 2 answer our questions. 3 I want to direct my first question to Mr. Price. 4 The description, the product scope of these 5 investigations includes HTS codes that are specific to 6 rebar as well as several others, codes covering bar that 7 are not specific to rebar. 8 Are there imports -- rebar imports coming in 9 covered under these other harmonized tariff schedule codes? 10 MR. PRICE: So now you get to the other part -- 11 one of the other parts of my job, which is enforcing these 12 orders at the border. And we have found very many 13 importers who are very clever and less than scrupulous, and 14 sometimes less than scrupulous outright, or just trying to 15 do minor things and claiming things are under another 16 tariff code. 17 And the principal -- as far as we know, the 18 subject imports are just in the principal rebar tariff 19 codes. 20 What you find if it is not in the module that 21 customs looks at at the end of the day, the odds of it ever 22 getting caught and anyone ever asking a question is very -- 23 very problematic. 24 Let me give you an example, and this is a very 25 real example. It involves Latvia, which is subject to an Ace-Federal Reporters, Inc. 202-347-3700

96 1 order that's out there. 2 All of a sudden, there is -- almost overnight 3 there was a 100,000 tons of alloy hot roll bar that came in 4 from Latvia. And at the time, there was no rebar breakout 5 in tariff schedule for alloy rebar. 6 As a result of that, those imports were never 7 suspended, and those imports evaded duties. And so sadly, 8 a big part of our -- of what we do is trying to figure out 9 how clever, scrupulous, creative, unscrupulous folks will 10 try to classify things in any way possible to avoid and 11 evade the orders. 12 Now, we all know it's technically the written 13 description that controls, but the more tariff numbers we 14 have in that pot for customs purposes, the more likely it 15 is that it will actually be flagged at the border and get 16 suspended, because the written description, as much as it 17 sort of is a theoretical basis of it, is not the way that 18 this thing is actually triggered at the border when rebar 19 crosses the border. 20 MS. TAYLOR: All right. Thank you. Karen 21 Taylor again, Office of Industries. I'd like to direct 22 this question -- I think it was you, Mr. Porter, who was 23 talking about when the economist was asking about the 24 primary raw materials used to make rebar, I believe it was 25 you who mentioned that outside the U.S., there is some use Ace-Federal Reporters, Inc. 202-347-3700

97 1 of semifinished as the primary input. 2 MR. CAMPO: Yeah, I believe I made that comment, 3 Peter Campo, Gerdau. 4 MS. TAYLOR: I'm sorry, Mr. Porter. 5 MR. CAMPO: And yeah, that's our understanding. 6 That as you might imagine, producers around the world are 7 looking at semifinished products versus -- available in the 8 marketplace versus their own cost to produce them. In some 9 cases, making substitution decisions along those lines. 10 The most significant impact of that has been 11 from China, which has pushed exports of very low-priced 12 semifinished goods around the world. So we've seen even 13 those who have the capacity to produce crude steel on their 14 own suspend those operations and only do the hot-rolled 15 rolling step of production of rebar. 16 MS. TAYLOR: How prevalent is that with the 17 subject countries? 18 MR. CAMPO: I could only speculate. I think we 19 should follow up and get you what quantified information we 20 have. 21 MR. PRICE: Alan Price, Wiley Rein. I suspect 22 you're better off asking the Respondents' panel that 23 question. Certainly in the press, there is well-documented 24 instances of Turkey and others importing what is now called 25 square bar from China, because they're evading their own Ace-Federal Reporters, Inc. 202-347-3700

98 1 tax -- the Chinese tax and working around the fat tax and 2 duty drawback systems, thank you. 3 So it's technically not semifinished. So 4 they're actually rerolling technical bars, in Chinese 5 bars -- whatever you want to call it, into rebar in 6 countries including, we believe Turkey, but we wouldn't be 7 surprised to see it in other Asian -- in Asian countries as 8 well. 9 MR. PORTER: Tracy Porter with CMC. To that 10 point of our global operations, obviously we have a pretty 11 good fix on what commodities are trading around the world 12 at any given point in time. 13 We were astonished that the price of Chinese 14 billets coming out of China. And I'll go so far as saying 15 that we have absolute certainty they were arriving in 16 Turkey. The thing that was astonishing to us was that 17 these billets were sold at prices well below the domestic 18 and global scrap market prices. 19 We know -- I've discussed this many times and 20 there's no traction for it, but in many ways, China is 21 under orders now that there is no rebar into the United 22 States, or at least without heavy duties. My view is it's 23 a circumvention of sorts to get to the U.S. market. But 24 apparently, I don't have the legal background or the -- 25 it's a pure emotional statement, I'll say that on my part. Ace-Federal Reporters, Inc. 202-347-3700

99 1 MS. TAYLOR: All right. Is using this 2 semifinished bar, whatever you want to call it, as raw 3 material, is that prevalent at all in the United States? 4 MR. PORTER: No. On CMC's part, no, absolutely 5 not. We do not import any semifinished, what we call a 6 billet in the industry, to produce them here. 7 MR. CAMPO: The same is true for Gerdau, Peter 8 Campo. 9 MR. BARNEY: Don Barney with Nucor. We have 10 imported some billets for our Connecticut operation. 11 MR. BYER: We do buy billets but we have not 12 imported any. 13 MS. TAYLOR: Thank you very much. That's all 14 the questions I have. 15 MR. ANDERSON: Okay. Thank you, Ms. Taylor. 16 Now we will turn the microphone over to our 17 supervisory investigator, Mr. Corkran. 18 MR. CORKRAN: Thank you all very much for being 19 here. My apologies for being late. We're kind of doing 20 double duty on multiple cases today. 21 My first question is probably a catch-up 22 question for Mr. Campo. 23 Mr. Campo, can you provide a little more detail 24 about the status of the Perth Amboy facilities, both 25 current but also over the past several years, in terms of Ace-Federal Reporters, Inc. 202-347-3700

100 1 what their product mix was, in terms of what their 2 operational status was? 3 MR. CAMPO: The Perth Amboy mill in Perth Amboy, 4 New Jersey, produced both wire rod and coil rebar, until 5 2010, was idled in 2010, has been maintained in an 6 operational state until about 2013 or 2014. In late 2014 7 or early 2015 we decided to sell the property, that it was 8 not a viable market opportunity to restart production of 9 those materials there, and the transaction to sell the 10 property occurred in mid-2016. 11 Parenthetically, in that same time period, we 12 established a rebar fabrication facility there that 13 supplied from Sayreville, New Jersey, a different mill that 14 we have. But it was unrelated to the original steel 15 production at Sayreville -- I'm sorry, at Perth Amboy. 16 MR. HOUSEMAN: I would add that it was a union 17 site too. 18 MR. CORKRAN: Thank you. Perhaps I missed the 19 context of when Perth Amboy was being -- was going through 20 these changes. 21 So does Perth Amboy's status have anything to do 22 with the imports at issue today? 23 MR. CAMPO: To the extent that we expected the 24 market opportunity would exist to restart the mill and that 25 hasn't been the case in 2013 through 2015, yes, absolutely. Ace-Federal Reporters, Inc. 202-347-3700

101 1 MR. CORKRAN: Okay. But just to be clear, this 2 was -- this was an operation that was producing wire rod, 3 coiled rebar, which is a small part of the market, had not 4 been operational since 2013-14, if I'm understanding 5 correctly. 6 MR. CAMPO: I believe it was idled in 2010. 7 MR. CORKRAN: 2010, okay. And was deemed not 8 viable as early as 2013-14? 9 MR. CAMPO: Was maintained in an operational 10 state through 2014 and 2015, before we decided to sell it. 11 MR. CORKRAN: Thank you. My next question was 12 for Mr. Barney at Nucor. There was -- I think in part of 13 your testimony, you were talking about the demand 14 environment improving but really only gradually, gradually 15 improving. 16 Has there been any region that has stood out in 17 terms of relatively stronger or relatively weaker demand 18 growth? 19 MR. BARNEY: From our perspective, really, no 20 region has shown significant strength and demand. In some 21 of the Sunbelt regions you could make the claim, in Texas, 22 Florida, California, you see a little bit more improvement 23 in demand. But overall, the modest improvement has been 24 measurable across the entire country. So it's not -- it's 25 not significant in any one area. Ace-Federal Reporters, Inc. 202-347-3700

102 1 MR. CORKRAN: Thank you. My next question goes 2 to Mr. Porter of CMC. And I was hoping maybe you could 3 give us a little more description of micromills, what are 4 their particular -- what is the benefit of a micromill 5 versus a more traditionally sized mill, what is -- what has 6 been your experience operating one micromill and bringing a 7 second one up to speed? 8 MR. PORTER: I'd like to respond to that in the 9 posthearing brief, if you don't mind. It's relatively 10 proprietary. 11 MR. CORKRAN: Okay. Thank you. Actually, my 12 next question I think also goes to Mr. Campo. 13 And I apologize for missing this earlier, but 14 there was some discussion of the status of the Rancho 15 Cucamonga facility. Can you provide a little more detail 16 on that as well? 17 MR. CAMPO: Yeah. We have a rebar production 18 facility at Rancho Cucamonga facility outside of 19 Los Angeles. It's producing rebar today. It's probably 20 running about 40 or 50 percent of its capacity, limited by 21 market conditions fundamentally. It was purchased by 22 Gerdau I think in 2010, was known previously as Tamco and 23 has operated in that location for more than 30 years. 24 MR. CORKRAN: Thank you very much. That was 25 very helpful. I appreciate that background. Ace-Federal Reporters, Inc. 202-347-3700

103 1 Mr. Byer, question for you as well. I listened 2 with interest to your testimony about the competition you 3 faced from imports. Several times today you mentioned your 4 competition with imports from Japan and Turkey. Have you 5 seen imports from Taiwan in your market? 6 MR. BYER: So I have personally not seen imports 7 from Taiwan. I know that the -- I know about the Japanese 8 and the Turkish, because before I left town that week, I 9 drove down to the docks and took pictures right here on my 10 iPad of the Japanese and Turkish material. 11 As far as the traceability of it, I believe once 12 it comes through customs at the border, there's no industry 13 information that traces that out of where it goes inland, 14 if I'm correct. 15 But I have not seen personally any Taiwanese 16 material. 17 MR. CORKRAN: And I believe your testimony was 18 that most of the imported rebar that you were seeing you 19 believe is coming up the Mississippi to Cincinnati; is that 20 correct. 21 MR. BYER: Yes. The majority of it is 22 sitting on ports, docks in Cincinnati. One of the other 23 interesting logistical points of it is as the coal industry 24 has been decimated, those terminals are doing whatever it 25 takes to get their operations going, along with the barge Ace-Federal Reporters, Inc. 202-347-3700

104 1 movers, fuel rates. 2 So not only the cost to get it across the 3 Atlantic or the Pacific is unbelievably lower than it 4 traditionally is, the cost to get it up the river is 5 immensely lower. The cost to handle everything is 6 discounted. 7 So yes, it's all sitting there right on the 8 dock, and it doesn't -- the question about Taiwanese is 9 interesting, but as far as the market is concerned, they do 10 not care where it comes from. It is all fungible, it's all 11 the same. And it's who is going to give the lower price 12 right now. 13 MR. CAMPO: Yeah. Peter Campo, Gerdau. We see 14 subject imports literally on every coast, the Gulf Coast, 15 Houston, New Orleans, Florida, Miami is very popular, up 16 the Eastern Seaboard, and certainly on the West Coast of 17 the U.S. as well. Perhaps not relevant to this discussion, 18 but into eastern and western coasts of Canada as well. 19 MR. BARNEY: Don Barney with Nucor. And just to 20 kind of build upon that a little bit more, before I 21 relocated to Charlotte, I spent a fair amount of time out 22 West at our Nucor facility in Plymouth, Utah. And the 23 subject imports that you referenced, Taiwanese, I think we 24 tend to think they're accumulating toward the coastal 25 regions, but the reality is we've seen them in places like Ace-Federal Reporters, Inc. 202-347-3700

105 1 Wyoming, Montana and Utah, so they are spreading out 2 further into the market than just staying along the coastal 3 regions. 4 MR. PRICE: And -- Alan Price. Just to 5 summarize for one second, the record shows that the imports 6 from all the countries are prevalent, there's sufficient 7 geographic overlap for cumulation, sufficient temporal 8 overlap consistent with all of your variety of recent 9 determinations. 10 So we'll explain that more in the posthearing -- 11 postconference brief. 12 MR. CORKRAN: No, I would appreciate that, 13 because I am quite interested in the ports of entry for the 14 imports from Taiwan and in the -- and their particular 15 presence in the U.S. market. 16 In terms of a reasonable overlap of competition, 17 I was interested in the slide 25 that showed the proportion 18 of operating margins in January through June 2016 relative 19 to earlier periods. 20 If we're talking about the nature of competition 21 in the U.S. market, can anybody describe what the import 22 volume from Taiwan was during that six-month period? 23 MR. PRICE: I'll briefly step in and say the 24 import volumes accelerated very heavily in -- from Taiwan 25 throughout 2015 into 2016. And actually, the Taiwanese Ace-Federal Reporters, Inc. 202-347-3700

106 1 imports were at June 30 about 3.4 percent of total imports. 2 Huge surge of imports in July, August and September, and 3 actually for -- and you will see massive amounts of 4 Taiwanese imports come in through those periods. 5 So what you're seeing is an acceleration of the 6 imports not only to meet the negligibility standards of 3 7 percent, but actually when you get to August, which is what 8 your data will be for negligibility purposes, it calculates 9 just under 6 percent of the imports are now Taiwanese. 10 These are again consistent with the volumes you have 11 consistently found both to be above negligible, 12 consistently be injurious in terms of -- in terms of the 13 cumulation criteria for both injury and threat. 14 MR. CORKRAN: My next question is a development 15 that I've found extremely interesting over the -- in recent 16 years. 17 Can anybody tell me what the status of the 18 independent steel alliance is at this point? 19 MR. BYER: I'm currently registered as a 20 supplier to the association. I was a founding member as an 21 independent fabricator. 22 What I can speak to it is it has moved very 23 little domestic material, which was its intention, to be a 24 cooperative to consolidate and bring buying power to the 25 independent fabricator. Ace-Federal Reporters, Inc. 202-347-3700

107 1 All I know of what it's ended up doing is 2 aggregating import buys and buying imported material, 3 helping facilitate by importing material for smaller 4 fabricators in outer markets that normally did not 5 participate in that. And it's -- that's all I know at this 6 point in time. We have not sold a pound into it. And I 7 have four members within 2700 miles of my facility. Good 8 friends of mine. But they buy the foreign and not mine. 9 MR. CORKRAN: Who would those fabricators tend 10 to be competing against? Would they tend to be competing 11 against the related fabricators that we heard discussed 12 earlier? 13 MR. BYER: It's different by market. I'd say 14 there's independent -- multiple independent fabricators in 15 each market, and there's potentially any larger mill-owned 16 fabrication operation in any one of those markets. But 17 that's -- they're competing with another fabricator for a 18 specific job. Some of them as we mentioned are -- the 19 lines get a little blurred when you talk about 20 distribution. Some may distribute to a downstream concrete 21 or masonry supply store. Most of them are selling listed 22 fabricated commercial projects. 23 MR. CORKRAN: Mr. Barney, I think it was you who 24 made the comment about the extent of the U.S. as a free 25 market with open borders for steel products. We've heard Ace-Federal Reporters, Inc. 202-347-3700

108 1 rebar compared to scrap in terms of global -- a global 2 market. 3 My question is in a market such as that, why 4 would we see a sustained premium in the U.S. market for 5 rebar relative to world prices? Wouldn't we expect to see 6 that premium diminish over time? 7 MR. BARNEY: I think that's evidence of the 8 prior case, the remedy that was granted, we actually did 9 see improvement in pricing and a realization of profit. 10 But that was very short-lived. If you see 11 what's transpired in 2015 and then going into 2016, we've 12 seen significant deterioration in pricing, and it's all 13 driven by the subject imports. 14 So I don't -- from the premium standpoint, we 15 had a period of time where we were able to get fair prices 16 in the marketplace. But since the end of 2015 and going 17 into 2016, prices have come down significantly. 18 MR. CORKRAN: If that price premium between the 19 North American market and the world market is diminishing, 20 and I was looking at MEPS data that suggested exactly what 21 you're describing, should we -- if we are looking ahead for 22 purposes of threat, should we expect to see diminished 23 import volumes because of the reduced differential between 24 the North American price and the world price? 25 MR. BARNEY: We talked about -- Don Barney, Ace-Federal Reporters, Inc. 202-347-3700

109 1 Nucor. We talked about this a little bit earlier, and I 2 don't know if you were in the room or not, but the 3 situation is what transpired at the end of 2015 and early 4 2016 when we drastically lowered our prices, we saw the 5 import, the subject imports come in lower again. And 6 that's what we referred to as just -- it just doesn't seem 7 to be a bottom. 8 So despite the fact of what you're saying, I 9 mean, this has been a continuation. We saw in 2015 with 10 lost volume. And we see it in 2016. And it's kind of our 11 worst fear as far as you're losing volume again, so it's a 12 threat -- it's not a threat, it's actually injury from 2015 13 and injury for 2016. So we're losing -- we've lowered our 14 prices, profits have been decimated. 15 Now we've got imports coming in at lower prices 16 again that we just can't compete with. 17 DR. KAPLAN: The U.S. is still the best market, 18 as Mr. Nolan, who you missed in his opening statement, 19 conceded, that it is currently the best market. 20 And there was previous testimony about the lack 21 of strength in other markets relative to the United States 22 expected in the future, both their demand side is expected 23 by forecast that Mr. Price read off, and also on the supply 24 side, as many of the markets that the subject producers 25 sell into are either being stressed by increased exports Ace-Federal Reporters, Inc. 202-347-3700

110 1 from China, or in the case of certain Middle Eastern and 2 North African countries, are building their own facilities. 3 So I think -- I think the facts dictate that 4 actually the threats are significant and sustained into the 5 foreseeable future. 6 MR. PRICE: Alan Price, Wiley Rein. Just to go 7 into a couple of issues here. 8 First, across all steel products the Commission 9 has recently investigated, U.S. price tends to be on the 10 high end of global prices and it generally has been for the 11 last, you know, 20-odd -- at least 20-odd years that I've 12 been really focusing on this, very narrow periods when that 13 is not the case, perhaps in 2007, 2008. It wasn't the case 14 when the Middle East was sort of going crazy and we were 15 kind of entering the beginning of the financial crisis but 16 no one really realized it, if we talk about sort of 17 macroeconomics. 18 But the U.S. is generally an attractive price -- 19 an attractive market, one of the higher-priced markets in 20 the world. 21 As you move into this product, all steel 22 products, there isn't actually a single global price to it. 23 And these guys -- these particular producers are 24 particularly aggressive in their pricing, have stepped in 25 at even lower levels. Ace-Federal Reporters, Inc. 202-347-3700

111 1 What is interesting, that the margins of 2 underselling have actually increased substantially during 3 the POI to actually push in more volume, which is -- so 4 these particular producers are problematic. 5 And despite what our Turkish friends will say, 6 in fact, their market is suffering from substantial excess 7 capacity for rebar, roughly 50 percent. You know, we can 8 argue over which mills and whatever, but the capacity 9 overhang is huge. 10 As a result, many of these mills will export at 11 virtually any price, with some -- at this point. 12 And so constant -- constant pressure on the U.S. 13 market vis-a-vis Turkey. Japan is purely opportunistic 14 dumping going on, same thing with Taiwan at this point. 15 Decisions to move product regardless of cost. And, you 16 know, I'm still waiting for anyone from Japan to explain to 17 me why their grade 60, grade 40, number 3, 4, 5, 6 rebar is 18 special. It's not. Essentially, these countries have 19 decided to dump at these particular prices. 20 MR. CAMPO: Peter Campo, Gerdau. I think the 21 common denominator in my mind is you have three countries 22 with far more capacity than -- far more supply than demand, 23 and an opportunity to sell it elsewhere in the world 24 market. Where wouldn't you do that but here? And all 25 three with relatively weak home markets exposed to Ace-Federal Reporters, Inc. 202-347-3700

112 1 competition from China, which has been very aggressively 2 pricing literally worldwide. 3 MR. CORKRAN: I have one last question, which I 4 think will probably be -- I'll ask for it in the 5 postconference brief, more of a conceptual question I 6 think. But we heard discussion earlier today of an 7 inventory overhang held in the distribution chain and that 8 it does not show up in the producer and importer 9 questionnaires. 10 This is a concept question. But that 11 characterization, doesn't that sort of overlook the fact 12 that to be in the supply chain at the distributor level 13 means that there has already been a sale in the United 14 States, that the volume has already been picked up as a 15 U.S. import entered into the United States and has been 16 picked up in our price data as an arm's-length -- first 17 arm's-length sale in the United States, such that it really 18 isn't arguably missing from the data set? It may not 19 appear as an inventory, but it is captured in the data set? 20 DR. KAPLAN: Yeah, let me address that. And I 21 think -- I think the answer is yes and no. It's -- and I 22 think you made the impact point. It's captured as a sale 23 if the importer sold it, and you have the data. It's not 24 captured in inventory because you don't collect inventory 25 on that. Ace-Federal Reporters, Inc. 202-347-3700

113 1 Now, the reason we raise that point is because 2 that inventory overhang creates great pressure on U.S. 3 prices, and as it came in, had big volume effects. 4 So as it came into the market in 2015, it picked 5 up share and negatively affected U.S. production, which 6 fell in a time of increasing demand. 7 Now in 2016, it's not in a building somewhere, 8 but it's sitting on a dock. And that overhang has 9 created -- well, that overhang, the last picture, has 10 created the pricing and profit pressure that you saw in 11 2016. 12 So to your answer, it should be in the pricing 13 data, it should be in the import data, but it's not in the 14 inventory data. And the effects of it being in inventory 15 are manifest in the lack of shipments in 2015 and the 16 decline in domestic production by these producers, and in 17 their financial data in 2016, as this oversupply of the 18 market hangs over and suppresses and depresses prices. 19 MR. PRICE: Alan Price. I'll just jump in one 20 more time on this. I go down to the docks unfortunately 21 surprisingly frequently, given what I do. And we haven't 22 seen these types of -- sort of this -- what you're seeing 23 in these pictures here, since, frankly, the 2001 period 24 when we had just these same pictures, piles and piles of 25 inventory just stacked up. Ace-Federal Reporters, Inc. 202-347-3700

114 1 So it has dramatic -- you know, and you 2 constantly see this. You have the -- it just sits there, 3 it's hitting prices, it's affecting prices. And guess 4 what, more of it is coming in. 5 And if you go back to the quote, it's this 6 actual inventory from the AMM article that's sitting there 7 in Inbesa right now. As it sits there, it's going to take 8 just two months for this inventory to go out, and there's 9 still more coming in. 10 So it's just a huge impact. First, as 11 Mr. Kaplan said, manifested itself in volume in '15 when 12 domestic production went down, and then transfers over to 13 price as it just sits on the market and weighs on it and 14 clobbers it. 15 And sadly, when the domestic industry has had 16 to -- you know, not sadly. The domestic industry competed 17 with it. Obviously, tremendous impacts on profitability in 18 2016, as they just priced this. And you see imports step 19 back maybe a little bit. 20 But when you come into July, August and 21 September data, which the Commission can look at the 22 official import data and the SEMA data out there, you see, 23 well, never mind, we're going to just shove more into the 24 marketplace. 25 That's what's sad about it. It's not like the Ace-Federal Reporters, Inc. 202-347-3700

115 1 action the domestic industry took stemmed the flow of 2 imports. It sort of paused it and then they said, well, we 3 have to cut again because we need the volume because we 4 have nowhere else we can ship in the world. 5 That is what the Turkish situation is, that is 6 what the Taiwanese situation is, that is what the Japanese 7 situation is. 8 MR. PORTER: This is Tracy Porter. I want to 9 make a comment about it, because I've seen this really 10 adverse effect on our business directly. We participate in 11 the Texas market very heavily. 12 The inventory levels -- and those pictures 13 really don't depict it. We've seen it, several of us have 14 seen these piles, and it's mountains of steel sitting down 15 there at the port, if you can envision 160- to 200,000 16 tons, it takes up a lot of acreage. 17 The irony of all of this, and I don't know this 18 to be a fact, it's supposition on my part, that there's 19 almost like a supply chain that exists today between Turkey 20 and the United States, and I won't comment on Japan at this 21 point because I haven't seen the same behavior out of them, 22 but that these ships are going to be coming regardless, and 23 these act as buffers or surge zones for it. 24 The part that's really difficult for us is as 25 these inventories rise, prices drop. And sound business Ace-Federal Reporters, Inc. 202-347-3700

116 1 practice would tell you that you make a deal, you make a 2 deal. But yet, we can find in some of the -- in the data 3 that's been provided to you, we can find extraordinary 4 outlying pricing to basically absorb or make room for the 5 next ship that's coming in. 6 So the disruption that the marketplace is -- you 7 know, the change in the behavior that we've seen over the 8 last few years and this stockpiling, if you will, of 9 material in the states is actually more consequential, 10 because -- we've heard it from the stevedoring companies, 11 there's another ship coming, they need to get this material 12 out of here. 13 So there are times that these prices are 14 absolutely absurd to make room, and there's opportunistic 15 buyers willing to take part in that, which obviously 16 trickles back into the marketplace, and that's what becomes 17 the new standard. 18 MR. BYER: Burke Byer from Byer Steel in 19 Cincinnati. To follow up on Tracy's point, the basic 20 principles of buyer psychology has changed because of the 21 dynamic change and the flow of the material in the market. 22 Traditionally when prices fall, buyers sit back 23 and say it will get cheaper tomorrow. When prices rise, 24 they step in and say well, I'll buy it today, it will be 25 cheaper than if I buy it tomorrow. Ace-Federal Reporters, Inc. 202-347-3700

117 1 This material is coming in, and I can tell you, 2 for example, we're being quoted as we speak, sitting right 3 here, we're being quoted numbers for material shipped in 4 the first quarter of next year at prices that we thought we 5 knew what the definition of ridiculous was, but it gets 6 even more ridiculous. We have no idea what the scrap 7 market is going to do next year. I have no idea what it's 8 going to do tomorrow and it just traded yesterday. 9 Those prices will come up. To Tracy's point, 10 it's paradigm that they will go all right, I'm going to 11 liquidate the stuff that's there, and the price is running 12 down before the market even gets here, material gets here. 13 And as the traders that we've dealt with have 14 told us, they're like it's kind of like being a drug 15 addict. You buy this, and when the price falls, you almost 16 have to stay in the game and keep buying it to keep it 17 moving and not lose your shirt. 18 MR. BARNEY: Don Barney with Nucor. I will 19 state that it's the Turkish, the Japanese and the Taiwanese 20 that are exceptionally aggressive in these markets. We're 21 seeing Japanese bar in Houston at the same port that the 22 other material is landing as well. So all three are 23 participating at these aggressive price levels and 24 impacting our marketplace. 25 MR. CORKRAN: Thank you all very much for your Ace-Federal Reporters, Inc. 202-347-3700

118 1 testimony. That concludes my questioning. 2 MR. ANDERSON: Okay. Thank you, Mr. Corkran. 3 I'm going to visually scan our staff here, if there are any 4 more follow-up questions. 5 Ms. Lo? 6 MS. LO: Sorry. Related to what Mr. Corkran 7 said, I had a question about this concept of excess 8 inventory everywhere. If you could give us posthearing 9 brief -- or sorry, postconference brief, what percentage of 10 this inventory is held relative to apparent consumption. 11 And I know Mr. Kaplan had mentioned that some of 12 the inventory can't be captured by questionnaire data, 13 which we'll crunch obviously and report it, but also that 14 90 days -- I believe Mr. Canosa had mentioned 90 days are 15 free. But this inventory costs money to store, so what 16 happens after 90 days? 17 So it's inventory -- typically 90-day kind of 18 holding? And also, related, somewhat related, it's this 19 whole import presence, several of you have testified to, 20 you said that in Wyoming, there's some Taiwanese product. 21 From my understanding, there's no country of 22 origin labeling on these bars; correct? 23 MR. PRICE: Actually, this is one of the unusual 24 things about rebar, is actually there's a roll mark on it, 25 and so -- and so everything has actually a country of Ace-Federal Reporters, Inc. 202-347-3700

119 1 origin. Not that they're tagged when it comes over, but 2 there's an actual roll mark. 3 So my best example of it was in the Capitol, 4 they were doing a security project, and we got a call from 5 the architect of the Capitol, and it's a Buy America 6 project. Obviously no foreign rebar would logically be 7 going into that. 8 They got a call from the architect that said 9 this mark says Ukraine. Can I assume that's not domestic 10 rebar? And the answer was yes, because it's rolled into 11 it. So it's -- so it's a little different than most other 12 steel products in that regard, and that's because the ASTM 13 standards. 14 MS. LO: Just in the follow-up question on the 15 Latvia issue, since they were caught, they were punished, 16 right, and they did have to pay? 17 MR. PRICE: I'll address that in the 18 postconference brief. 19 MS. LO: Thank you. Thanks. 20 MR. PRICE: At this point, it's quite historic, 21 but it -- but again, the module didn't -- the point was the 22 module didn't have alloy hot roll bar, which was the tariff 23 number at the time. They were correctly classifying it at 24 the time. It wasn't in the customs module, so no one knew 25 to suspend it at customs. Ace-Federal Reporters, Inc. 202-347-3700

120 1 MR. CANOSA: Can I follow up on your question on 2 the port, 90-day free, what happened after the 90 days. 3 It's related to Mr. Porter and Mr. Byers referring to the 4 attorneys, to move. A lot of case they sell the material 5 even below the price that is recorded in the customs 6 documentation to be able to move the material so the next 7 boat can come in or avoid port charges. So the offer price 8 in the market is even below what you guys see in the 9 customs records. 10 MS. LO: One final question that was brought up 11 by Mr. Porter. You mentioned bundling these milk runs by 12 these independent distributors. I had some issues with 13 bundling questions. 14 But do you service these smaller customers as 15 well? You're happy to do these milk runs to -- any of you? 16 MR. PORTER: No. When I say bundling, in the 17 way rebar is packaged, it's called a bundle. So there's, 18 you know, three or four bundles that are delivered to one 19 customer and to the next. 20 Our company, CMC, does not distribute less than 21 truckload quantities of rebar. 22 MR. BYER: That is our niche. We are the little 23 guy. We -- you want anything from one ton to five 24 truckloads a month, give us a call. We are losing that 25 business to -- that's a traditional -- that's a service and Ace-Federal Reporters, Inc. 202-347-3700

121 1 value that we have added that most steel mills can't 2 perform. And we are losing that business to import 3 materials that that will make mixed truckloads at the 4 docks. You want to buy one ton of this, some 40s and some 5 20-footers of those, you can mix and match that if you 6 wish, doesn't matter. It's all the same to them, and the 7 price is cheaper, and all the services at no extra cost. 8 MR. PRICE: We'll address it more in the 9 posthearing brief, but the domestic industry actually 10 services all of the marketplace. 11 MS. LO: Thanks. 12 MR. ANDERSON: Okay. With that, I want to say 13 my colleagues have done a very able job of asking 14 questions, I don't have anything further to add. I want to 15 thank you all for your testimony. It's been very helpful, 16 and we very much look forward to your postconference 17 comments. 18 With the conclusion of this panel, we will take 19 approximately a 15-minute break according to the clock on 20 the wall, we'll reconvene at 12:40. So thank you very 21 much. 22 (Recess.) 23 MR. ANDERSON: Good afternoon. Mr. Nolan, I see 24 that your panel is all seated, and thank you for being here 25 today. Please start when you're ready. Ace-Federal Reporters, Inc. 202-347-3700

122 1 MR. NOLAN: All right. Thank you very much. 2 This is Matt Nolan with Arent Fox again on behalf of 3 Turkey. Thank you for starting us early, so we are going 4 to skip lunch, but that's okay because we're going to get 5 out of here a little earlier, so that's a good thing. 6 Our panel today is going to talk about obviously 7 the foreign producer side of things. We are weighted on 8 the Turkish side, since they're the 900-pound gorilla here 9 as it were. Mr. Lee is representing the Taiwanese 10 importers or producers, and so the order is I'm going to 11 start with Mr. Namik Ekinci, head of the Turkish Steel 12 Exporters' Association, and his associate, Ebru Dursun, who 13 is his translator. 14 Now, we worked on a statement for him, which is 15 his statement. But because my English is a bit better than 16 his, we figured it was easier for me to read his statement 17 for him, so it's easier for you to understand. He will be 18 available obviously to answer any and all questions, but 19 will need the interpreter because Namik's English is 20 about -- well, it's better than my Turkish, but that's not 21 saying very much. So I'm going to start with Namik's 22 statement. 23 STATEMENT OF NAMIK EKINCI 24 Ladies and gentlemen of the Commission Staff, 25 good afternoon. My name is Namik Ekinci, and I am the Ace-Federal Reporters, Inc. 202-347-3700

123 1 president of the Turkish Steel Exporters' Association. I 2 have been in the steel business for 50 years, and I'm also 3 chairman of the board of a Turkish steel mill that produces 4 rebar, Ekinciler Demir Ve Celik Sanayi AS. My hope today 5 is provide you with some information and remove doubt about 6 Turkey's participation in the U.S. market. 7 The Turkish Steel Exporters' Association is a 8 business association of producers and exporters in the 9 Turkish steel community. We have a membership of more than 10 700 exporting companies. Our goals are to serve our 11 members' needs and to realize the potential of the Turkish 12 steel sector and to attain globally sustainable competitive 13 strength based on fair trade. 14 When we first learned of these new cases, we 15 were, quite frankly, surprised and confused. 16 Our country and producers just completed the 17 very same investigations in 2014 only two years ago. In 18 those cases, Turkish producers were cleared of all dumping 19 charges, with no margins, zero margins. A very slight 1.25 20 percent countervailing duty margin was found for Icdas, and 21 we continue to believe that that finding was erroneous. 22 Nevertheless, Turkey accepted a CVD order on rebar which 23 continues today. 24 Habas, on the other hand, was cleared of any 25 subsidy charges, and dumping for that matter. Ace-Federal Reporters, Inc. 202-347-3700

124 1 Having been found not guilty of all dumping 2 charges and with minimal CVD rates in place, Turkey 3 believed that it was cleared of further unfair trading 4 claims and continued trading at nondumped, nonsubsidized 5 prices. 6 Now, two years later, we're back speaking with 7 the Commission on the exact same issues because the U.S. 8 industry did not like the result it got the last time. Our 9 question is, when will this cycle end? How often can they 10 repeat this process against Turkey? And do we have to 11 prove yet again that Turkey does not engage in unfair trade 12 practices? 13 We do not dispute that Turkey is a world class 14 steel producer and exporter. We are proud of our industry, 15 and we are competitive in world markets, including the 16 United States, without the need to dump or receive 17 subsidies. 18 In 2015, we operated at relatively high capacity 19 utilization rates, over 80 percent, which is close to the 20 upper limit for our rebar mill. We consumed more than half 21 of our production in Turkey on local and state construction 22 projects. The other half was exported all over the world. 23 Our domestic construction market is quite active 24 and is growing at a rate of over 6 percent per year, and we 25 will give specifics on that in our post conference. Ace-Federal Reporters, Inc. 202-347-3700

125 1 While the U.S. is a significant market for our 2 exports due to very strong demand and high prices, as 3 Mr. Kaplan kept saying, it is not the largest or only 4 export market for Turkey. Indeed, Turkey shipped over 4 5 million metric tons to the Middle East region alone in 6 2015. That includes the United Arab Emirates, Israel, 7 Iraq, Egypt, Kuwait and Saudi Arabia. 8 Contrary to U.S. industry predictions in this 9 case and the last case, demand in the Middle East has not 10 fallen. It may change from country to country, but 11 overall, the demand is stable and increasing. 12 Indeed, Turkey shipped to -- rebar to 150 13 countries last year, unlike U.S. producers. We sell our 14 products to all countries and in Turkey at the same basic 15 FOB price. Except, for example -- except when it comes to 16 the United States. We actually sell to the U.S. at a 17 higher price in order to avoid dumping charges. 18 Even so, even with the additional price, our 19 average U.S. price to the U.S. market is probably more than 20 $100 below U.S. prices simply because we do not need to 21 make as much of a profit as the U.S. mills seem to. 22 We make a good profit on our business, we make a 23 modest profit on our business. Our pricing is carefully 24 considered to ensure we are not dumping, but we price to be 25 competitive. Our price is largely dictated by scrap Ace-Federal Reporters, Inc. 202-347-3700

126 1 prices, which were quite volatile during the period of 2 investigation. 3 In 2014, scrap prices reached nearly $400 a ton, 4 then dropped to $250 a ton by mid 2015, and fell below $200 5 a ton by late 2015 and early 2016, a drop of over 50 6 percent in the price of scrap will have an unavoidable and 7 relative immediate impact on the price of rebar in the spot 8 market. 9 It is not surprising that U.S. prices fell in 10 this environment. It is neither our intention nor is it 11 possible for the Turkish rebar industry to capture the U.S. 12 market as Petitioners would like you to believe. There are 13 several reasons for this. 14 Most specifically, U.S. producers enjoy 15 significant advantages in this market. Since the last 16 investigation and sunset reviews, the U.S. producers have 17 become larger, they own rebar plants coast to coast and 18 internationally, they are financially stronger and very 19 importantly they are virtually completely vertically 20 integrated. 21 In the U.S. market, U.S. producers have no 22 international shipping costs, they control their raw 23 material supplies, scrap, they have the ability to sell and 24 deliver to U.S. customers that require just in time 25 delivery, and U.S. producers are able to make use of the Ace-Federal Reporters, Inc. 202-347-3700

127 1 highest quality scrap at their mills and export secondary 2 material to countries like Turkey. 3 On the other hand, Turkish producers cannot 4 anticipate what scrap prices will be. We are not as 5 vertically integrated as U.S. producers, who have better 6 control of their scrap prices. We must accept lower 7 quality scrap, and that scrap often comes from the United 8 States. 9 We do not produce without firm orders, and we 10 require payment at the time of shipment. We will not lower 11 prices to capture markets, but we price our material 12 consistently based on the world market. 13 The rise in our exports to the USA is due to the 14 fact that U.S. importers prefer Turkish firms, which have 15 competitive prices and abide by free market rules. This 16 rise is brought about by competitive and demand-oriented 17 sales, which constitute the operation of free markets. 18 Furthermore, the U.S. demand has also risen over 19 the years. Increased demand naturally leads to increased 20 imports. If this demand is not met by pricey domestic 21 products but imported products and this constitutes a 22 problem for domestic manufacturers, then maybe they should 23 review their conditions of manufacturing instead of laying 24 blame on imports which comply with WTO rules. 25 Further, as I noted earlier, we have developed Ace-Federal Reporters, Inc. 202-347-3700

128 1 other markets that are growing faster and offer us more 2 opportunity, in particular the United Arab Emirates, which 3 is the single largest export market for Turkey, and the 4 Middle East, North and West Africa. We directed our 5 marketing resources to the Middle East and African 6 countries, which are growing economies, where consumption 7 rate for rebar is relatively high. 8 Turkey is a responsible competitor. Thank you 9 for your attention. I will do my best to answer any 10 questions you have. 11 Thank you, Namik, for that. 12 Okay. So I'm going to go into this a little bit 13 and hand it over to Adams Lee in a minute. We're going to 14 go off my presentation, PowerPoint. I'm not going to 15 bother putting it up on the screen because it's too much of 16 a pain, and we're all sitting around the table. 17 Let's talk a little about history to start with 18 on page 1, or page 2 of this PowerPoint. Turkey -- this is 19 not Turkey's first rodeo, all right, in front of the 20 Commission, in front of the Commerce Department. I've been 21 advising them for over 10 years on these cases. 22 They have legal counsel. They know what the 23 rules are. We do take a great deal of pain and effort to 24 make sure we're following the rules. 25 Starting with dumping margins in 2003, we go to Ace-Federal Reporters, Inc. 202-347-3700

129 1 2004, you start getting de minimis margins from Commerce, 2 you get de minimis for Icdas, Colakoglu and Diler. 2005, 3 Icdas order gets revoked, Habas gets zero de minimis 4 margin, Colakoglu gets a de minimis margin. I'm not going 5 to go through every single one of these, but the result of 6 this is with all of the Turkish companies getting smart, 7 they ended up with zero dumping margins and the order ended 8 up getting revoked in 2008. 9 Now we spin forward to 2014, we do the case 10 again. What happens? There's no dumping, there's no 11 subsidies for one of the biggest exporters, and the others 12 are stuck with a 1.25 percent barely above de minimis 13 margin on CVD. 14 So what has changed since then? The Petitioners 15 have been up here all morning telling you it must be 16 dumped, it must be dumped, it must be dumped. The evidence 17 suggests the exact opposite, that there is no dumping, 18 there has been no dumping, and there will be no dumping. 19 So why are we back here today? What has 20 changed? First, major U.S. producers like Nucor, CMC, 21 Gerdau have further integrated operations from their scrap 22 upstream to their downstream fabrication operations. They 23 supply their own downstream operations from their internal 24 production. 25 I found it curious when they sort of downplayed Ace-Federal Reporters, Inc. 202-347-3700

130 1 significantly that, you know, well, we don't know what the 2 price is to the fabricators, we can't tell, they don't tell 3 us if Buy America matters or this or that. 4 They own the fabricators, all right. If you 5 look at the specifics, the last case and this case, a 6 significant portion of what they're selling goes to their 7 own internal fabrication units. 8 If, in fact, the fair market value is being 9 charged and if, in fact, imports are cheaper, why are they 10 doing that? Why would they internally source a significant 11 amount of their rebar to their own fabrication operations? 12 Why wouldn't you? That's the point of having an 13 integrated operation. There's no benefit to having an 14 integrated scrap, rebar and fabrication operation if you 15 are not going to use it. 16 I submit to you that that gives them a fair 17 amount of insulation from imports. They're using their own 18 production upstream, their rebar productions midstream, to 19 their fabrication facilities downstream. That's an 20 important condition of competition. 21 Why does scrap matter? Quality, secure supply 22 and cost. Those are the three biggies. Secure supply they 23 did tell you about. They admitted that they wanted secure 24 supply for their scrap operations. They didn't tell you 25 when you have your own scrap supply, you can cull off the Ace-Federal Reporters, Inc. 202-347-3700

131 1 top end of that scrap, use it on your own mill and sell the 2 rest of it in the open market, which is in fact what 3 happens. So they're using the best quality scrap in their 4 operations. 5 And third is cost. They keep telling you that 6 they are selling at fair market value. I suggest the 7 Commission take a hard look at that. I'm not quite sure 8 I'm persuaded by that. And we'll have to get into that in 9 the post conference because that gets into some specifics 10 that I'm not allowed to talk about. 11 Downstream operations, fabrication operations. 12 Nucor has Harris Steel. They have at least 70 fabrication 13 facilities in the United States. CMC has a downstream 14 fabrication business. Gerdau has at least 60 or 70 15 downstream fabrication operations in the United States. 16 These are not small operations. They are 17 significant, and they are completely internally sourced by 18 their rebar operations. 19 Buy America. I was curious that they kept 20 downplaying the Buy America. Buy America is a law. It is 21 a federal statute. It is a preference given to domestic 22 merchandise. You are not allowed to sell to the U.S. 23 government or state governments unless you comply with Buy 24 America. And if you do, you get into trouble for it. So 25 it's not so simple as we just sell a bunch of rebar, we Ace-Federal Reporters, Inc. 202-347-3700

132 1 don't know where it's going. 2 The fabricators definitely know where it's 3 going, and if you happen to own the fabrication operation 4 that is supplying that, then you definitely know where it's 5 going, whether you want to say we're not looking at it, but 6 they are, I don't really care. The fact is Nucor owns 7 Harris, Harris is running the fabrication operations on 8 those Buy America Act projects, they are clearly buying 9 U.S. material for those projects. It does matter. 10 Third, U.S. producers have been making money in 11 the current market. Contrary to what they're saying to you 12 in those lovely charts this morning, I have some 13 inconvenient truths to provide you in a few minutes on the 14 margins they are actually making in this market. 15 Yes, Turkish imports have increased. We are not 16 going to deny that. They have gone up. They went up after 17 they were investigated and exonerated. They went up after 18 U.S. demand kept calling them and saying, the prices here 19 are outrageously high, please come into this market. It's 20 not surprising what happened. 21 In the end, U.S. consumers are paying the higher 22 prices relative to costs as a result of this. 23 Slide 4. From the 2014 investigation. The 24 Staff found in that investigation that raw material scrap 25 accounted for about two-thirds of the cost of rebar, Ace-Federal Reporters, Inc. 202-347-3700

133 1 somewhere between 60 and 70 percent. That's in the public 2 Staff report. 3 Assuming a ton of rebar cost 500, that would 4 make $330 of the cost steel scrap. A decrease in the cost 5 of scrap to $200 would then decrease the total cost to 6 $370, or 26 percent drop in the cost. With the consequent 7 drop in price. 8 In 2015, steel scrap costs fell from over $350 9 to under $200 a ton, indicating a downward price pressure 10 of approximately 25 percent on rebar in the United States. 11 Slide 5. I went into Nucor's quarterly reports 12 and culled out their actual scrap costs, which they report 13 in their quarterly data. 14 If you notice from the chart, scrap costs fell 15 precipitously in 2015. And, in fact, if you look at the 16 numbers on the right side of this chart, I give a change 17 from prior quarter and percentage change from prior year. 18 Once we get to mid 2015, the change is on the 19 order of 40-plus percentage points in the cost of scrap. 20 That is not an insubstantial drop. And you cannot tell me 21 that that doesn't have a direct impact on the price of 22 rebar, an overriding impact on the price of rebar. That is 23 what drives the market. 24 Slide 6. To illustrate this, I did a 25 correlation analysis of rebar scrap costs and rebar prices. Ace-Federal Reporters, Inc. 202-347-3700

134 1 The lower blue line is the average heavy melt, number one 2 heavy melt scrap price published in American Metal Market 3 for Chicago. The top line is the FOB mill price reported 4 in -- on a monthly basis in American Metal Market. 5 You will notice, one, there is a very high 6 degree of correlation between scrap price and rebar price. 7 Again, scrap price influences, if not drives, rebar price. 8 Also, and most notably, I ran a trend line 9 analysis of the two sets, those are those two straight 10 lines going down. 11 If you will notice, the margin between scrap and 12 rebar price actually grew during the POI. It's more narrow 13 at the front end -- or November 2012 and is expanded some 14 by 2016. 15 So what you're seeing is instead of it being a 16 flat line parallel, it's doing this. If imports were 17 affecting this equation, it should go the other direction. 18 You should be narrowing that margin, not expanding it. 19 It's doing the opposite of what they're telling you. 20 This is, again, illustrated in slide 7. We did 21 an analysis that simply indexes, starting both scrap and 22 rebar price at 100, and then indexing the changes for you. 23 You will notice the digression in that rebar and 24 melt scrap started deviating significantly in 2015. And 25 deviating in a way that benefits the price of rebar. The Ace-Federal Reporters, Inc. 202-347-3700

135 1 margins went up. Again, the margins went up. 2 Slide 8. Again, another illustration of this 3 point. I'm sorry I'm beating on it, but this is pretty 4 important. 5 We took the quarterly average price of scrap 6 from American Metal Market and took the quarterly average 7 price of rebar from American Metal Market and ran an 8 analysis. 9 The margin percentage on the right side is the 10 amount of the difference between a price of rebar over the 11 price of scrap on a percentage basis. 12 Look what those numbers do. They start out at 13 41 percent, and by the fourth quarter of 2015, we are over 14 70 percent different. The margin went up to 70 percent. 15 That means rebar price, the spread between the 16 rebar price and the scrap price, has increased 17 significantly during that period. 18 It also explains another phenomenon. The 19 Petitioners took great pains to say that the underselling 20 has increased during the POI. Well, if Turkey is following 21 the general rule, which is you add certain scrap to your 22 price and sell at those prices competitively, then you're 23 going to maintain a certain distance between your scrap 24 price and your rebar price, which is going to be parallel. 25 If you do that in the U.S. industry, increases Ace-Federal Reporters, Inc. 202-347-3700

136 1 that margin, you're going to create underselling. You are 2 going to manufacture in underselling, increased 3 underselling, which to me is an indication that either 4 somebody got very greedy in this market or somebody is 5 planning to try to play a game in front of the Commission, 6 not sure which. 7 Let's move to slide 9. What are some key 8 industry metrics? As we said, scrap prices fell, U.S. 9 producers captured increasing margins relative to scrap 10 costs. Prices fell less than scrap costs, leaning to 11 better profitability for U.S. industry. 12 U.S. capacity utilization rates during the POI 13 were relatively stable and actually increased during the 14 interim period. 15 I would note, though, we have a very curious 16 phenomenon here. We had a case that ended in 2014, or 17 20 -- yeah. So we actually have data from 2014 from the 18 last investigation, and I have reviewed the public record 19 of it. 20 I would like the Commission to take a hard look 21 at what the capacity utilization numbers were in 2013 in 22 this case and what they're being reported at in this case. 23 There is an anomaly. That's all I'm going to say. 24 Next page. It's very difficult to get public 25 information on metrics without getting into APO data, Ace-Federal Reporters, Inc. 202-347-3700

137 1 except with respect to, I think, CMC, because Commercial 2 Metals is, I think, one of the more pure rebar companies of 3 this group. New more makes everything, Gerdau makes 4 everything, Steel Dynamics makes everything, so it's hard 5 to pull that taffy apart without getting the BPI. 6 But CMC is -- from August 31, 2015 fiscal year. 7 Their net sales between 2013 and 2015 went up 8 significantly. 2014 went up, down a little bit in 2015, 9 but still above 2013 numbers. And this is while scrap 10 prices are dropping like a stone. 11 Their operating profit went up significantly 12 from 204,000 to $304,000, a 33 percent increase. Their 13 finished goods selling price went down, as it should, 14 because scrap prices went down, but not by much as you 15 would have expected, given that scrap prices fell 40 16 percent, their prices did not fall 40 percent. 17 The cost of scrap, however, did go down 18 significantly, although reported as less than you might 19 think. The metal margin went up, and their raw material 20 costs as a percent seemed to remain relatively stable, but 21 something doesn't seem right there. 22 So they reported a quote from their fiscal 23 statement the average cost of ferrous scrap consumed 24 decreased $60 per short ton compared to physical 2014, 25 which more than offset the decrease of total shipments and Ace-Federal Reporters, Inc. 202-347-3700

138 1 an average selling price above and increased our average 2 margins by 9 percent, quote unquote, from their annual 3 report. 4 Slide 11. Some other U.S. industry metrics. 5 Again, a large percentage of U.S. sales were to related 6 parties, affiliated fabricators in particular, I think 7 that's a key element here. 8 The average price to related firms is different 9 than the commercial shipment price for this same period. I 10 urge the Commission to look at that carefully, because they 11 just testified that oh, yes, it's all fair market value, 12 it's all at the same price. 13 Buy America Act requirements still cover at 14 least 10 percent of U.S. producer sales, and based on the 15 last case, the Commission found that domestic rebar 16 preferences accounted for 20 percent of all sales. I don't 17 think that's changed at all. 18 And, yes, the Fixing America's Surface 19 Transportation Act is supposed to boost demand. Hasn't 20 happened yet, but everybody is talking about 2017 being the 21 magic year. 22 Also want to just note that they talked about 23 shipping costs, and shipping costs coming up the 24 Mississippi River. I want to come back to my slides in a 25 second. Ace-Federal Reporters, Inc. 202-347-3700

139 1 It is a fact that shipping costs internationally 2 are far cheaper than our surface transportation costs. You 3 can ship scrap to Turkey, turn around and ship, turn it 4 back around to the U.S. for less than it costs to ship 5 rebar over land say 1000 miles, easy. That's a given. I 6 accept that. 7 But what they didn't tell you is when you ship a 8 barge up river, you have something called the Jones Act you 9 have to deal with. You cannot use international shipping 10 costs anymore. 11 The Jones Act says, it's a U.S. law that's been 12 in effect for a long time, and it says you must use a U.S. 13 crude, U.S. flag, U.S. built vessel for any coastwide 14 trade. The difference in Jones Act prices for 15 transportation and international freight is massive. There 16 is a substantial increase because the Jones Act is 17 designed, for better or worse, to protect U.S. shipping. 18 That means that gives them an automatic guaranteed market, 19 all coastwide trade is at a higher price than international 20 shipping. 21 So let's go back to the slide. Slide 12, we 22 talked a little bit about construction markets, slide 12 23 and 13 give you a little feel for that. 24 You will notice on the first -- on slide 12, we 25 do a little bit on residential construction put in place Ace-Federal Reporters, Inc. 202-347-3700

140 1 for each of the years. And it went up pretty healthily in 2 2013, 2014, 2015. I agree 2016 is showing some curb. But 3 the demand curve during 2013-2015 was fairly robust. Also 4 shows the seasonality aspect of it, as the Commission is 5 well aware, there's a high degree of seasonality in 6 construction markets. Doesn't happen in the winter very 7 much. 8 So what you're seeing here is the bell curve 9 from winter to summer, back to winter again. But it does 10 show a fairly robust growth in construction rates on 11 residential, and again, on slide 13 on nonresidential. 12 So the demand was there to support more traffic. 13 The issue becomes, at what price? What price is the right 14 price to sell at? And the Petitioners will keep telling 15 you that it's because it was unfairly priced Turkish 16 merchandise. I think what happened here is the U.S. 17 industry invited imports to come in because they were 18 charging such high prices relative to what scrap costs are. 19 And you may say well, that's enough for us to 20 continue with the investigation, there's nothing I can do 21 about that. But that is what's going on here. 22 Slide 14, Turkish producer metrics. The Turkish 23 producers have a limited product range, more limited than 24 the U.S. The vast majority of Turkish material will be 25 coming in in the 20- to 40-foot range. Will you find some Ace-Federal Reporters, Inc. 202-347-3700

141 1 small amounts coming in at different sizes? It's quite 2 possible. But if you look at the responses, the 3 predominant amount is always going to be in that range, 4 most imports are going to be grade 60, some in grade 40, a 5 very small amount in grade 75, but trace amounts. 6 And most of that is straight length rebar. I 7 think the amount of coiled rebar is trace coming into the 8 U.S. market relative to straight from Turkey. And it's not 9 further fabricated. Obviously, the cost of having 10 something prefabricated, the shipping costs would be too 11 high. So you don't fabricate it, because you're shipping a 12 lot of air at that point. 13 They have long lead times. You order from 14 Turkey, it's 90 days before you see the material. So that 15 means you're having to project out over 90 days what the 16 price is going to be of that rebar. That results in a 17 discount, because you are telling the Turkish producer, I'm 18 not going to make a guess as to what that price is, 19 particularly when you can't hedge, right, we just talked 20 about there's no hedging on the rebar market right now. 21 So if you're buying 90 days out, you want some 22 certainty that the price you're paying today is not going 23 to be overpriced, so you're going to say I want a discount 24 from what I would consider a nominal price in the U.S. 25 because you're not going to give it to me for three months. Ace-Federal Reporters, Inc. 202-347-3700

142 1 There is a discount that gets built in. 2 Payment is due upon shipment. When the Turks 3 put that material on the boat, they expect money in the 4 bank. So they don't take things on account. They sell to 5 distributors, and the vast majority of Turkish shipments 6 are sold within 100 miles of the port. 7 I would note that the discussion this morning on 8 inventory, number one, that material is captured because 9 everything hitting the U.S. shores has been sold to someone 10 whether it gets here. As I said, you've got to complete 11 the sale and pay for it before it ships so it is captured 12 in the data set. 13 Number two, most ports that I know of have a 14 45-day rule, which allows you to leave material on the port 15 when you get it so you don't have to ship it onto your own 16 yard. So a significant amount of material is going to be 17 sitting on any yard because they keep it there for free, 18 okay. 19 I'm not saying that there isn't more Turkish 20 material. I would be crazy to tell you there isn't a lot 21 more Turkish material coming in. The fact is inventory 22 coming into ports as soon as it clears, you're allowed to 23 keep it for 45 days without paying for it, that's a nice 24 benny when you're not wanting to increase your stockyards. 25 And as I said, Turkish material utilization rates are high. Ace-Federal Reporters, Inc. 202-347-3700

143 1 Go to the Turkish market for just a minute. I'm 2 almost done. The Turkish domestic market is very healthy. 3 Their construction sector is growing at a rate of over 4 6-1/2 percent right now. Long products demand increased 13 5 percent in the first half of 2016. The additional growth 6 projections in the Turkish economy, just looking at the 7 latest statistics, running over 4, 4-1/2 percent for them 8 right now. It's a very robust economy. It's improving. 9 There's a lot of projects. 10 Turkey is always in a construction zone. They 11 put a new airport in. They have got new bridges going up, 12 two or three new highways, they've got the pipeline going 13 in, a lot of activity occupying Turkish material. 14 And lastly, Turkish export markets. This is a 15 POI chart, which is very similar to what you would see in 16 2015. I took the midpoint for the POI. 17 But if you will notice, the number one export 18 destination is the United Arab Emirates, followed by all 19 other countries that are not listed here, followed by the 20 United States, followed by Israel and Iraq and Ethiopia and 21 Saudi and a number of other countries. 22 The only reason I put this up here is to show 23 you just the diversity of export supply. We don't deny 24 Turkey is an export market. It certainly is. But it 25 doesn't sacrifice all these other markets for the U.S. Ace-Federal Reporters, Inc. 202-347-3700

144 1 market, because it wants diversity of supply. It wants to 2 be able to say, we're shipping to 150 different countries, 3 because if one market gets soft, another improves. If one 4 market closes, another market opens. 5 They always maintain all the markets, which is a 6 far cry from what you see with the U.S. producers, who 7 basically stick to the U.S. and Canadian markets. 8 That's about all I have to say. I'm going to 9 turn it over to Mr. Lee. 10 STATEMENT OF ADAMS LEE 11 MR. LEE: Thank you. Good afternoon. My name 12 is Adams Lee. I'm with Harris Moure, and I am representing 13 the Taiwan Steel & Iron Industry Association and a number 14 of the Taiwanese rebar producers from that country. 15 Today I would like to talk about negligiblity. 16 When I looked at the petition, Exhibit 23 had the monthly 17 import statistics for Taiwan and all the subject countries 18 and total imports. I looked at it and said, hey, I think 19 we have a -- we have an argument here. We can make this 3 20 percent argument here, because when you looked at the data, 21 you looked at 2013. Basically, Taiwan had less than 500 22 short tons, basically nothing in 2013. 23 In 2014, for the entire year, they had a little 24 over 6000 short tons, and that's out of 1.4 million total 25 imports, so that's, again, well less than -- well below 1 Ace-Federal Reporters, Inc. 202-347-3700

145 1 percent. 2 Keep in mind, that is also after the Mexican 3 Turkish CVD order went into effect in the middle of 2014, 4 and still Taiwan is well below negligible levels. 5 So then -- so the idea that the last order 6 created an incentive for Taiwan to ship to the U.S. The 7 import data for 2014 doesn't show that. 8 Going into 2015, you see a slight increase in 9 Taiwan's import levels, but even through June 2016, that 10 12-month period going from July 2015 to June 2016, Taiwan 11 imports are still only at around 2.5 percent. So they're 12 still under negligible levels. 13 So this morning, the Petitioners presented their 14 slides on the domestic industry's performance over the POI. 15 So from 2013, 2014, 2015 and through interim June 2016. 16 If you look at the imports, that's Taiwan's 17 presence all the way June 2016 is well below negligible 18 levels. It's only when you look at July 2016 and August 19 2016, the August data was just released last week. If you 20 just look at those two last months, that's the source of 21 where Taiwan's import volumes bumped up above 3 percent. 22 So yes, if you are looking at a 12-month period 23 going through August 2016 or even July 2016, we are above 3 24 percent. 25 But if you're looking at whether Taiwan is the Ace-Federal Reporters, Inc. 202-347-3700

146 1 cause of anything that's happening to the domestic industry 2 in this POI, our import levels through June 2016 are 3 clearly negligible, and we should not be held responsible 4 for the condition that the domestic industry says they're 5 in. 6 On negligibility, there was some discussion 7 earlier this morning about the HTS codes that should be 8 used to calculate the total imports. I think it was 9 acknowledged that in terms of the subject imports, the 10 three HTS codes that were listed do adequately capture the 11 subject imports. 12 However, for the nonsubject imports, because 13 there are roughly a dozen other HTS codes that were put in 14 there to capture possible circumventions from the other 15 previous orders, we would urge the Commission to look into 16 whether the denominator of the negligibility calculation, 17 whether that should be expanded to include certain rebar 18 imports from other subject countries, such as China, 19 Latvia, Ukraine, Belarus, et cetera, et cetera, whether the 20 volumes of those nonsubject for this investigation, whether 21 those nonsubject imports should be expanded in the 22 denominator for the negligiblity calculation. 23 So then I guess I would like to raise a number 24 of issues regarding Taiwan's rebar imports, in part to 25 highlight how Taiwan's imports are not a direct competitor, Ace-Federal Reporters, Inc. 202-347-3700

147 1 the overlap of competition with the domestic industry is 2 attenuated at best. And, you know, just want to lay the 3 foundation for these arguments so that the Commission can 4 try to explore these issues in the final investigation and 5 try to develop questions that will get further information 6 on some of these issues. 7 First of all, Taiwan rebar imports came in 8 predominantly through the West Coast ports, Los Angeles, 9 San Francisco accounted for the vast majority of Taiwan 10 rebar imports over the entire POI. There are no records of 11 Taiwan rebar imports coming in through any East Coast 12 ports. There are no Taiwan imports coming in through the 13 ports of New Orleans, Miami. 14 So Taiwan is definitely West Coast 15 predominantly, their presence is isolated to the West 16 Coast. Whether the West Coast is just those ports, no, of 17 course not. It comes in through those ports, but it is 18 primarily servicing the West Coast. So whether it's going 19 across to Utah, Montana, yes, but that raises another 20 question, why is the demand still there? 21 Earlier this morning, the domestic producers 22 talked about how, yes, they use the full range of products, 23 you know, all types of grades, all sizes. But it was also 24 noted that they prefer to run as long as possible, because 25 that maximizes their profitability. Ace-Federal Reporters, Inc. 202-347-3700

148 1 So if you can run for a product that has a 2 larger demand, of course the domestic producers are going 3 to want to do that. 4 If you have a product that doesn't have a lot of 5 demand, you only have occasional request for smaller sizes 6 or irregular lengths or something like that, you're not 7 going to go out of your way to produce it. 8 You can produce it, but that doesn't necessarily 9 mean that you want to. 10 So given that there is a broad spectrum of rebar 11 products out there and there's a broad spectrum of 12 fabricators and types of projects that need rebar, what 13 you're finding with Taiwan is that Taiwan rebar is -- a 14 significant portion of it is going for smaller sizes. Like 15 number 3s, you're looking at shorter lengths, 20, 20-foot 16 lengths. 17 These are the sizes, the types that are not in 18 the mainstream, they're not the primary products that the 19 domestic producers wish to supply. 20 The other thing that is for Taiwanese suppliers 21 is that they are -- it looks like they're supplying a lot 22 of the independent distributors. So there was discussion 23 earlier this morning about how the independent distributors 24 are servicing the mom-and-pop hardware stores, the ones who 25 are taking the less than full truckloads, these are the Ace-Federal Reporters, Inc. 202-347-3700

149 1 milk runs. 2 So if there is a demand by these smaller players 3 in the marketplace, it's not going to be the big guys, it's 4 not going to be Nucor, it's not going to be Gerdau, it's 5 not going to be CMC. CMC acknowledged that they don't do 6 less than full truckloads. So there is still a demand for 7 that segment of the marketplace. And given where the 8 prices are in the U.S. market, Taiwan is -- was able to 9 meet that demand. 10 So that's an important consideration that at the 11 end in July, August, you know, most recently, Taiwan has 12 been able to fill a market demand that clearly was not 13 being satisfied by the domestics or by any other imports. 14 So one other thing that we noted in terms of why 15 Taiwan is coming in so suddenly at July/August of 2016, we 16 noted that Japan, in terms of their currency in 2016, the 17 yen has experienced a significant appreciation. So just 18 within 2016, it looks like the yen has appreciated about 20 19 percent. 20 So that appreciation has a direct impact on 21 their exports, because it just makes their products that 22 much more expensive. 23 So we're looking at the data to see 24 coincidentally, or perhaps not, it looks like Japan's 25 import volume in July 2016 also dropped off very Ace-Federal Reporters, Inc. 202-347-3700

150 1 significantly. 2 We are hearing that Taiwan was able to come in 3 because they were a replacement for Japanese imports, 4 especially for the number 3 sized rebar. 5 So the other thing that we wanted to raise, 6 which may affect the final investigations analysis of 7 negligibility, is that the margins alleged by the 8 Petitioners for Taiwan, they were based on a calculation 9 that relied on a surrogate value methodology for Taiwan. 10 They used Taiwan import stats to value the main material 11 inputs. It was very similar to how margins are calculated 12 for Chinese nonmarket economy cases. 13 We feel that if the Department conducts its 14 margin using the Taiwan Respondents' actual costs, we feel 15 that -- we are hopeful that the margins will be 16 significantly lower and hopefully de minimis. 17 Presumably, if any of the Taiwan mandatories 18 receive a de minimis margin in the Commerce final 19 determination, that would certainly affect your final 20 negligiblity analysis, and we feel that even one of the 21 Taiwanese -- Taiwan producers, if they were to get 22 negligiblity -- sorry, if they were to get de minimis, 23 Taiwan as a whole should also get below the 3 percent 24 negligiblity threshold. 25 So in short, Taiwan rebar imports were Ace-Federal Reporters, Inc. 202-347-3700

151 1 negligible for basically the entire POI. It's just July 2 and August of 2016 that was pushing them above the 3 3 percent threshold. So Taiwan looks like it was a 4 replacement for Japanese rebar in smaller sizes and shorter 5 lengths. 6 The products that are basically going to 7 independent distributors, that are going to the smaller 8 fabricators that are not fully served by the domestic 9 industry. Taiwan rebar is primarily geographically 10 isolated in the western markets, they are not competing 11 directly in any of the East Coast or even the Midwest 12 markets. 13 So we would hopefully request that the 14 Commission try to develop questions for the final 15 investigation that try to break down just exactly where are 16 the Taiwan imports and hopefully that will demonstrate that 17 Taiwan is not really competing directly with the domestic 18 industry and are not a cause of injury or threat of injury 19 to the domestic industry. Thank you. 20 MR. NOLAN: That concludes our affirmative 21 testimony. We would reserve the balance of our time. 22 MR. ANDERSON: Thank you, Mr. Nolan, and to the 23 panelists for your statements. It's been very helpful. We 24 will now proceed with questions from Staff, and we'll start 25 with Ms. Lo. Ace-Federal Reporters, Inc. 202-347-3700

152 1 MS. LO: Again, thank you for your testimony 2 today Mr. Ekinci. A question you already touched on in 3 your testimony about the inventory numbers. Could you help 4 me understand? So your inventory comes in and it's already 5 paid for when it reaches our ports? Is that correct? 6 MS. DURSUN: Ebru speaks for Mr. Namik Ekinci. 7 Yes, the inventory or the products will come, 8 but payments -- payments will before the shipments. 9 MR. NOLAN: So they can't -- a ship can't leave 10 until the shipment has been paid for, right. The ship 11 won't leave the Turkish port until. So when invoicing 12 occurs in Turkey and it's being loaded on the ship, they 13 have to have assurance that an LC or something is in place 14 to guarantee payment upon delivery. Essentially payment 15 when it hits the ship. So they won't have any -- I mean, 16 the foreign producers won't have any inventory. The buyer 17 might have inventory in the U.S., but your Turkish 18 producers won't maintain it. 19 MS. LO: And again, you only sell to 20 distributors, no fabricators? 21 MR. NOLAN: So distributors and traders. 22 MS. LO: Only distributors. 23 MR. NOLAN: In Turkey. So there are some 24 companies in Turkey that are just traders, right. They 25 will buy from the foreign companies and the Turkish Ace-Federal Reporters, Inc. 202-347-3700

153 1 producer will know it's going someplace, but -- or perhaps 2 they will know it's going to the U.S., but they won't know 3 the customer, because you will see some traders, in fact we 4 were at a steel conference and I was approached this past 5 week, and there were some steel traders in Turkey that 6 that's all they do is they buy and sell. 7 MS. LO: I'll look at the numbers closer, and if 8 I have specific questions, I'll direct them to Mr. Nolan. 9 The other question I had was, of all the Turkish 10 producers you represent, do you know of production 11 efficiencies or technologies that may have made the Turkish 12 rebar producers more competitive pricewise, since scrap 13 is -- 14 MR. NOLAN: Well, Ebru is talking to Namik. I 15 have been at most Turkish steel mills, so I think I can 16 help with that. 17 So there's a couple of things to remember with 18 Turkish industry. One, almost all Turkish steel mills are 19 on the water, right on the Mediterranean Sea. There is a 20 significant reason for that. Logistics makes a huge 21 difference in this business. If you can have a ship pull 22 up to a dock, unload scrap, convert that scrap into rebar, 23 then fill that ship back up again and send it back out, 24 that's a huge cost advantage, all right. You can actually 25 afford to import your scrap, pay the shipping costs and Ace-Federal Reporters, Inc. 202-347-3700

154 1 still have a better margin because of the proximity of the 2 mill to the water. 3 Waterborne international sea traffic is by far 4 the least expensive way to move any bulky product. And so 5 if you can put a mill on the water or next to the water, 6 that's an advantage. 7 Couple that with the fact that most Turkish 8 companies have their own ships, they don't contract, they 9 have their own charter operations. So they have the ships 10 to go out and buy the scrap, pick it up, bring it to the 11 port, to the mill, and the mill -- it sits -- there's a 12 port, and the mill is here, it's their port, their mill, 13 their ship. 14 They're integrated in the sense of when they 15 make rebar, they control that part of the logistics part of 16 the operation, which to me is actually as important as 17 scrap and fabrication operations on the U.S. side. Because 18 when you control that aspect, you control one of your 19 biggest unknown costs, which is transport fees. 20 As I said before, the cost of transportation is 21 lower than land transport, by far. So you can get away 22 with a lot. 23 The other thing is that Turkey doesn't -- most 24 Turkish companies are privately held. They don't have the 25 same profit expectation, I guess is the only way to put it, Ace-Federal Reporters, Inc. 202-347-3700

155 1 as a U.S. company that has shareholders to pay, dividends 2 to pay. 3 So a modest profit for a Turkish company is 4 quite acceptable, as opposed to perhaps a U.S. company that 5 feels it needs to make a much higher profit margin relative 6 to an equivalent Turkish producer. 7 So there's both a profit incentive and a cost 8 advantage. 9 MS. LO: I'll direct this question to Mr. Lee. 10 For the argument you made about Taiwanese imports replacing 11 Japanese imports for the August and July data, do you know 12 the status of Taiwanese replacing Japanese imports or other 13 nonsubject imports going forward, or is it just an isolated 14 incident? What is your contention? 15 MR. LEE: I do not have information developed on 16 that. 17 I think what we've heard is that there was a 18 significant presence of Japanese imports that came in 2015, 19 2016. But as the yen appreciated in 2016, Japanese rebar 20 became less attractive. 21 And so it's at that point where we had 22 distributors, trading companies reaching out to the 23 Taiwanese mills to say, hey, look, can you supply there? 24 Taiwan was looked to as an alternative to what these 25 distributors and trading companies had previously sourced Ace-Federal Reporters, Inc. 202-347-3700

156 1 from Japanese rebar suppliers. 2 So in terms of what we think will happen going 3 forward, it's hard to say. You know, we weren't actively 4 going out looking for the U.S. market. It was the 5 distributors and trading companies coming to our guys. 6 MS. LO: Thank you. That's all the questions I 7 have for this panel. Thank you. 8 MR. ANDERSON: Thank you, Ms. Lo. 9 And now we'll turn it over to Mr. Laroski. 10 MR. LAROSKI: Thank you. And thank you both for 11 your presentation. With respect to the Petitioners' 12 statement of the domestic like product, will either 13 country's counsel be challenging that definition? 14 MR. NOLAN: Not from the Turkish standpoint. 15 Rebar has been around a long time. We've had enough 16 investigations and reviews and sunsets that I don't think 17 it's going to change much. So it is what it is. 18 MR. LEE: We're not challenging. 19 MR. LAROSKI: Thank you. And Mr. Lee, with 20 respect to your arguments on negligiblity, are you 21 advocating that the Commission look at a different period 22 for negligiblity for one purpose as opposed to another? 23 What's the actual period that the Commission is required to 24 look at in your mind? 25 MR. LEE: I think the statute is pretty clear, Ace-Federal Reporters, Inc. 202-347-3700

157 1 it's the most recent 12-month period that you have data 2 available. So I think in terms of going through August 3 2016, I think that's what the statute requires for you. 4 I think what we're asking the Commission to look 5 into is, you know, for the circumvention reasons that were 6 raised by Petitioners, you know, perhaps the denominator 7 may need to be adjusted upwards for certain volume of rebar 8 that has come in since 2013 under other HTS codes other 9 than the three primary HTS numbers. 10 MR. LAROSKI: Will you address that in your 11 posthearing brief as to what category should be included 12 and what -- 13 MR. LEE: Absolutely. I'll try to come up with 14 something. 15 MR. LAROSKI: Another question to both Mr. Lee 16 and Mr. Nolan with respect to the Petitioners, will there 17 be any related party arguments? 18 MR. LEE: I don't think we're going to be 19 raising any related party arguments. 20 MR. NOLAN: Not from this side. As I said, 21 we've done this before, so it would have come up. 22 MR. LAROSKI: One other question I have with 23 respect to the length of the rebar shipped, I think I heard 24 from both Taiwan and Turkey that the majority of the 25 shipments were shorter lengths of 20 to 40 feet from a Ace-Federal Reporters, Inc. 202-347-3700

158 1 practical standpoint to the customer, what does that really 2 mean, and -- I mean, if a distributor had an 80-foot length 3 and a customer wanted 20s, is -- isn't it just a matter of 4 a simple operation to fill an order with a larger length or 5 for the customer to do it themselves, for that matter? 6 MR. LEE: I'll take the first stab at that. My 7 understanding is that it isn't as simple as just taking an 8 80-foot length and cutting it. If you have to cut it, 9 that's an extra step that either the supplier has to do or 10 the customer has to do. 11 So clearly, the preference for the customer 12 would be to get what they want without any extra steps in 13 between. 14 So if they are turning to domestic suppliers and 15 say, hey, can you provide us with the shorter lengths, I'm 16 sure the U.S. producers have it within their catalogue. It 17 is within their portfolio of products that they can supply. 18 But do they have quantities in inventory that they're ready 19 to ship? I'm not so certain about that. So it's an extra 20 effort for everyone involved to get those products out to 21 those particular customers. 22 So whether it's easy or available, whether it's 23 more available through a distributor or trading company who 24 can source from Japan or Korea or some other import source, 25 I think that becomes part of the calculation and customers Ace-Federal Reporters, Inc. 202-347-3700

159 1 that are looking for that type of sale. 2 MR. NOLAN: We'll address this some in the post 3 conference because we're sort of conferring on it to make 4 sure. But my sense of it is is that Turkey sticks to sort 5 of standardized sizes because it's easier. If you want to 6 maintain a high throughput rate, which is characteristic of 7 the Turkish industry, every investigation review we've ever 8 done, it's sort of the utilization rates seem to be higher, 9 and that's because they go for regular throughput rates, 10 and they do that by maintaining standardized sizes that 11 they offer to people. 12 That's not to say you couldn't offer a longer 13 size, but they predominantly wouldn't do that, because it 14 takes them out of their -- it takes them out of their sweet 15 spot, right. From a mill standpoint, they produce certain 16 things well and they produce some efficiently and 17 competitively. That's where they stick. 18 So you're not going to see 80-foot rebar coming 19 off of a ship from Turkey very often. It just doesn't make 20 sense for them. 21 MS. ALVES: Good afternoon, Mary Jane Alves from 22 the General Counsel's office. Thank you for your 23 presentations this afternoon, they have been very helpful. 24 I have two quick questions for Mr. Nolan and your client. 25 You alluded this afternoon to purchases by the Ace-Federal Reporters, Inc. 202-347-3700

160 1 Turkish industry of second class scrap or the leftovers 2 that the domestic industry didn't already have. What 3 impact does that have as a practical matter to the end 4 users? 5 MR. NOLAN: Okay. Namik is going to talk to 6 Ebru. I'll start and then he can pick up on it. 7 Essentially, the mix of scrap that you get, you 8 know, there's better pure steel commodity -- grade that 9 when you put it in the electric arc furnace, it melts 10 better, it has less impurities in it, it's cleaner, you 11 have less slag stuff coming out of the bottom when you are 12 doing that. So you have more efficient operation for doing 13 that. 14 As you move down the scale with more impure 15 scrap, more, I don't want to call it dirty, but scrap that 16 is more mixed, you will have more impurities, you will 17 have more issues with it, you will have more having to put 18 ferro alloys in it, you'll have more issues that need to be 19 addressed in the production process. 20 So what I think happens or what we believe 21 happens is naturally, when you own your own scrap 22 operations, it's, I hate to say it this way, but it's like 23 having your own winery; right? You're going to keep the 24 good stuff for yourself and then sell off the commercial 25 stuff to everybody else. That's pretty characteristic. Ace-Federal Reporters, Inc. 202-347-3700

161 1 That's a good idea from my standpoint. It makes you more 2 competitive, because you're taking the most efficient, most 3 high grade material, and converting that into yours, which 4 costs less as a result, than selling the other stuff, where 5 you're still making money on it. 6 So I think that is what happens in Turkey knows 7 that when it buys scrap from the U.S. mills or from scrap 8 providers, especially if it's an affiliate of one of the 9 producers here, they are not going to get the same quality 10 scrap as they get from, say, another country sometimes. 11 He reminds me, the cost of electricity is a very 12 big part of an electric arc furnace. The impurities cause 13 them to use more electricity to manufacture the rebar or 14 steel from that. Therefore, it ends up costing more, so 15 that's another cost factor that goes into it. 16 Thank you. 17 MS. ALVES: I'd like you to think about that 18 response for purposes of your postconference brief. It's 19 curious, then, so your production costs would be higher if 20 you're both from an electricity standpoint and then from an 21 impurity standpoint if you're purchasing the inferior 22 scrap. But yet there are arguments being made by 23 Petitioners that you're selling at increasing underselling 24 margins in the United States. 25 MR. NOLAN: Right. Ace-Federal Reporters, Inc. 202-347-3700

162 1 MS. ALVES: So is there a disconnect between the 2 two? 3 MR. NOLAN: Only if you think that the Turkish 4 mills are as efficient or less efficient than U.S. mills as 5 opposed to more efficient. I firmly believe Turkish mills 6 are simply more efficient at what they do as a general 7 proposition. 8 I might add a couple of things to that. One, 9 you know, there's this presumption that there must be 10 dumping going on, unfair practices. 11 As I said before, Turkey has been through this a 12 dozen times. They know the rules, follow the rules, last 13 investigation they found no dumping. 14 Let's start from the premise of maybe they're 15 not dumping this time, that little scintilla of 16 possibility, maybe they're not dumping. So why are they so 17 good at this? 18 As they said before, one, they don't expect as 19 high a margin as U.S. producers do in order to make a 20 profit. Their profit expectations are lower. 21 And, two, they manage to sell at a higher 22 throughput rate on average and maintain a higher throughput 23 rate. 24 You can lower your price and maintain a higher 25 throughput rate, you actually -- you know the demand Ace-Federal Reporters, Inc. 202-347-3700

163 1 curves, how that works. I mean, production curves is on 2 cost. That's how they run their businesses, why they ship 3 to 150 countries. They want to maintain their throughput 4 rate. 5 MS. ALVES: Just a quick comment in response to 6 that answer. As a legal matter, is the Commission required 7 to assume for purposes of its preliminary determination 8 that the imports are, in fact, unfairly traded? 9 MR. NOLAN: As a legal matter? No. But I like 10 to -- you know, this infects the analysis. This goes back 11 to how often does a petitioner get to come back and make 12 the same argument over again. Because if that is indeed 13 purely the case, then we could keep going through this 14 cycle every year or two, forever. Maybe that is what's 15 going to happen. I don't know. Maybe you'll keep me in 16 business and get my kids through college. 17 MS. ALVES: Mine too. One other quick question 18 for Mr. Nolan. You reference the Jones Act. Petitioners 19 also mentioned this morning their understanding that 20 notwithstanding the Jones Act, that transportation costs, 21 for example, coming up the Mississippi River, have gotten 22 substantially lower and more competitive due to the fact 23 that there has been decline in the need for those shipping 24 services for other products such as coal. 25 Are you aware of any changes that way? Ace-Federal Reporters, Inc. 202-347-3700

164 1 MR. NOLAN: Yes. But this is relative to land 2 transportation. This is relative to truck and rail. And 3 so is it lower than it used to be relative to truck and 4 rail? Yes. Is it still significantly higher than 5 international shipping rates? Yes. 6 MS. ALVES: Thank you. Those are all the 7 questions I have at this point. 8 MR. ANDERSON: Okay. Thank you. And now we'll 9 turn it over to our economist, Ms. Breaux. Your turn. 10 MS. BREAUX: Good afternoon. I have a 11 relatively few questions. And I wanted to start out with 12 raw materials, since that seems to be the bulk of what's 13 going on here. And I want to start out with the Taiwanese 14 industry. I'm not sure if I caught this. I was trying to 15 take in everything that the Turkish industries were saying. 16 But I wanted to know, is scrap mostly what is 17 used in the Taiwanese product? 18 MR. LEE: I believe so. I'll have to get 19 confirmation of that. But I believe we are scrap based. 20 MS. BREAUX: If you can also figure out where 21 the scrap is coming from, whether it's coming from the 22 U.S., like the Turkish industry, that will be great. 23 MR. LEE: I'll look into that. 24 MS. BREAUX: And to follow up with the Turkish 25 industry, I wanted to make sure, you said that you get Ace-Federal Reporters, Inc. 202-347-3700

165 1 scrap from the U.S. Is that your main source of scrap, or 2 is there -- 3 MR. NOLAN: It varies. So Namik, the places you 4 buy international scrap from? 5 MR. EKINCI: Europe, Russia, Ukraine, mainly 6 these. 7 MR. NOLAN: So it's going to vary over time. 8 And there was a suggestion -- well, not a suggestion. 9 There was sort of an allegation this morning that Turkey 10 has been buying Chinese bar and turning it into rebar in 11 Turkey. That's not happening, okay. 12 The Turkish mills operate electric arc furnaces. 13 They bring scrap in, you'll see it on any Web site for any 14 Turkish rebar producer, they convert that scrap in the 15 electric arc furnace into rebar and they sell the rebar. 16 There was a dalliance during the hot roll period 17 when some of the Turkish mills were using some material 18 from China and Russia because it got so cheap for a little 19 while that it was just impossible not to. But they had so 20 many issues with the quality that they stopped doing it. 21 That's the only one that I know of, and it's not rebar. 22 MS. BREAUX: All right. My next question deals 23 more with how raw materials, particularly scrap, affect 24 prices. It seems pretty strongly that you are saying that 25 the decrease in scrap prices should lead to a decrease in Ace-Federal Reporters, Inc. 202-347-3700

166 1 prices. 2 What I want to know is how -- since raw 3 materials only account for two-thirds of the costs, how the 4 other third of costs have affected prices. And that might 5 not be something you can answer right here, but I invite 6 both sides to comment on that as well. 7 MR. NOLAN: I mean, you know, obviously the 8 highest single fixed cost again comes back to scrap. And 9 contrary to what people say, it took me 10 minutes to 10 download a history of scrap prices and FOB rebar prices off 11 of the American Metal Market site. You can duplicate this 12 on a number of different sites. 13 Everybody knows what the price of scrap is, and 14 you're not looking at what it was yesterday. You're saying 15 okay, what was it the last two weeks, so if the trend is 16 going down, well, I have an expectation about what's going 17 to happen with rebar prices if I see it going this way as 18 opposed to this way. 19 It's hard for me not to believe that every buyer 20 of rebar is not aware of this chart, because American Metal 21 Market sure likes to publish it a lot. 22 The other prices, a lot of them are costs of 23 electricity, significant cost of manufacture. That's a 24 disadvantage for Turkey obviously because they have higher 25 costs for electricity, higher costs for natural gas, oil, Ace-Federal Reporters, Inc. 202-347-3700

167 1 electricity generation relative to the United States. 2 But they still seem to be competitive in that 3 environment. 4 Labor costs are higher in the U.S. as a general 5 proposition. There are other costs that these mills have. 6 Maybe there's more regulation. There's always the issue of 7 safety regulations and things being more stringent in this 8 country relative to other countries. 9 I think Turkey has a pretty good track record, 10 but I think there's probably just more costs built into the 11 U.S. system. The specifics we'll have to address in post 12 conference because that gets into APO data. 13 MS. BREAUX: Specifically, I wanted to know that 14 if -- when quoting a price for rebar, is there -- in any 15 way is it pegged to scrap prices? So if I quote you a 16 price code and it's based on scrap prices, will that price 17 change or is it just a stagnant price? 18 MR. NOLAN: As I said, my perception of the 19 industry is that everybody follows trend lines. So knowing 20 that scrap is going down, you are going to have an 21 expectation that rebar is going to follow fairly shortly 22 thereafter. And so, you know, it's not an accident that 23 this correlation exists between these two graphs, because 24 there is this expectation. 25 Could you say, you know, is somebody going to Ace-Federal Reporters, Inc. 202-347-3700

168 1 come up to you and say, well, I pegged scrap prices at $280 2 yesterday so I want you to lower your price by $50 because 3 it went down by $50? 4 They will say no. I say intrinsically, it's 5 buried in every negotiation that they have. They may say, 6 well, imports are coming at a lower rate, so that's their 7 argument. 8 Okay. The imports may be coming in at a lower 9 rate because scrap prices went down, okay. So it really to 10 me comes back to scrap price. I fundamentally believe that 11 anybody buying rebar and anybody in this business knows 12 that you follow scrap prices and you will adjust. 13 All the rebar manufacturers in Turkey follow 14 these trends on scrap prices assiduously. I've sat in a 15 room with the traders where they monitor on an hour-by-hour 16 basis what scrap prices are doing in various markets 17 because they're trying to buy it quick, when they can get 18 it, convert that into rebar and move it out at the price 19 that makes money for them on the basis of that scrap cost. 20 MS. BREAUX: All right. My next question comes 21 from Buy American. I don't have the previous report on me 22 handy, so the percentages that you quoted today, is that 23 from the previous report? 24 MR. NOLAN: Yes, that's from the previous Staff 25 report and publication 4496. Ace-Federal Reporters, Inc. 202-347-3700

169 1 MS. BREAUX: Thank you. My next question, and 2 this was brought up by the Petitioners, and it's the idea 3 that there are end users and distributors in the United 4 States that are directly importing product from subject 5 countries. 6 And I wanted to get your opinion on whether or 7 not you think that this practice is increasing versus 8 something -- versus the usual model of just the importers 9 importing and then selling to distributors. 10 MR. NOLAN: So I think we'll get into the 11 specifics in the post conference, because there's APO, 12 you've collected data on that in the questionnaire 13 responses. 14 My perception is it's still predominantly 15 distributors, if not almost exclusively. 16 There are some instances, because of the 17 dumping -- no. Because of the CVD order that's been put in 18 place, Turkish producers have set up their own importing 19 operations because U.S. buyers are too wary to buy material 20 from a country under order. So now they're acting as their 21 own importers of record to allow that trade to continue and 22 absorbing the risk of having a higher margin get 23 established later. 24 So from that standpoint, once you set up 25 yourself as your own importer of record, then you're Ace-Federal Reporters, Inc. 202-347-3700

170 1 selling to distributors, still predominantly distributors, 2 or is the possibility that some people are directly coming 3 up to get rid of the middleman? I'd say quite probably 4 there is some of that, but I don't think it's a predominant 5 or a significant trend. 6 MR. LEE: I think for Taiwan, we're so small 7 that we're really not in the end user market. We're just 8 selling to distributors and trading companies. 9 MS. BREAUX: That's all the questions I have. 10 MR. ANDERSON: Thank you. Mr. Boyland? 11 MR. BOYLAND: Good afternoon. Thank you for 12 your testimony. One question, Mr. Nolan, you referred to a 13 lower profit expectation. Could you sort of flesh out, I 14 mean, in what sense and why that would be the case? I 15 mean, I sort of take profit -- companies try to maximize 16 it. So what's different? 17 MR. NOLAN: So this is the definition between 18 privately held and publicly traded companies right now. 19 It's my perception, if you look at the big rebar players, 20 Colakoglu is owned by the Colakoglu family, Ekinciler is 21 owned by the Ekinci family. Icdas is owned by the family. 22 So these are family run international production 23 businesses. It's not different than you would expect in 24 any internal business. They will be more modest, I think, 25 in their expectations, because they don't have to satisfy Ace-Federal Reporters, Inc. 202-347-3700

171 1 50,000 shareholders who want their next dividend payment to 2 go up to 81 cents this quarter as opposed to 79 cents. 3 There's just less pressure on them in that 4 environment, as compared to, say, if you look at the U.S. 5 financials, I've been poring over the 2015 annuals for CMC, 6 Nucor and the others for the last four days, and they're 7 all about what their earnings per share is going to be, 8 what their profitability, what their dividend declaration 9 is going to be to their shareholders. 10 I think there is in expectation of a higher 11 profit margin to put distribution out. It was interesting 12 that I noted that their cash position is as high as it's 13 been in like 10 years in these companies. They say they're 14 not making money, but they have a huge amount of cash built 15 up. Presumably there's going to be some consolidation in 16 this industry and that's what it's going to be used for. 17 MR. BOYLAND: Thank you. So it's not really so 18 much of a structural difference in Turkey as a difference 19 between public versus family-owned? 20 MR. NOLAN: For a Turkish business, an 8 percent 21 profit margin is a great profit margin, okay. For a U.S. 22 business, that might not be acceptable. They might say 23 well, we have to make more than that. 24 And even so, I mean, assuming that Turkey -- 25 because Turkey wasn't found dumping in the last case. Ace-Federal Reporters, Inc. 202-347-3700

172 1 We're not talking about now. Let's talk about 2013. So 2 Turkey wasn't found to be dumping its product in 2012, 3 2013. They were selling under the same conditions then as 4 they're selling now, and yet they were -- all those mills 5 were profitable in Turkey during that entire period. How 6 is it possible unless their expectations are different or 7 their mills are terribly more efficient? 8 I don't doubt the fact that the U.S. mills have 9 gotten a lot more efficient over the years. Actually, the 10 new mills that have come in, the mini mills and things 11 here, are very competitive. But I do think there's still a 12 disconnect on the pricing system, because the prices that 13 are in this market -- you know, Mr. Kaplan was quoting me 14 this morning at length about how I'm saying the prices in 15 the U.S. are so high. They were high. They're the highest 16 in the world. And yet that doesn't seem to make enough of 17 a difference for them to make more money. 18 I don't really -- I can't explain that, frankly, 19 because every other country that makes rebar -- like Turkey 20 makes money on lower prices than that, good money. How do 21 you explain that phenomenon and why is it appropriate to 22 say that this market should be charging $150 a ton price 23 premium over everybody else? Is that really what we're 24 going to be saying, that's the litmus test for injury right 25 now, that you should be charging a price premium in this Ace-Federal Reporters, Inc. 202-347-3700

173 1 market? 2 MR. BOYLAND: Thank you. I have no further 3 questions. 4 MR. ANDERSON: Ms. Taylor and Mr. LaRocca? 5 MS. TAYLOR: Hello, Karen Taylor, Office of 6 Industries. I'm going to ask you the same question that I 7 asked the first panel, and this has to do with the 8 prevalence of using purchased semi-finished steel instead 9 of -- to produce rebar instead of scrap. 10 MR. NOLAN: I am not aware of a single 11 producer/exporter to the United States of rebar from Turkey 12 using anything but scrap to make rebar. 13 MR. LEE: For Taiwan, I'll have to confirm, but 14 I believe that's also the case. 15 MR. NOLAN: And I will confirm it with our folks 16 and all of the production companies to be absolutely 17 positive about it, but I think I would have heard about it 18 if it was going on. 19 MR. LEE: I don't think any Taiwan producers are 20 purchasing semi finished steel to produce their rebar. 21 MS. TAYLOR: Or what was called, I think, square 22 bar? 23 MR. NOLAN: Yeah, I know what square bar is. 24 That's something that actually they make on their same 25 mills here. And that actually raises a whole another set Ace-Federal Reporters, Inc. 202-347-3700

174 1 of questions, because a lot of mills here produce more than 2 just rebar. How are we allocating those expenses? How are 3 we allocating the production? 4 This takes me back to another question about how 5 again, capacity and capacity utilization reported in 2013 6 in this is different than what we're talking about now at 7 least according to the aggregate data I looked at. Why? 8 MS. TAYLOR: All right. I have no further 9 questions. 10 MR. ANDERSON: Thank you. Mr. Corkran? 11 Microphone is yours. 12 MR. CORKRAN: Thank you all for coming here 13 today. Your testimony has been very enlightening. 14 I'd like to direct a question to Mr. Ekinci, 15 please. Turkey has seen its share of political tensions in 16 recent times. Can you talk a little bit about the impact 17 that that situation has had on the Turkish economic 18 environment and how that might impact rebar demand in 19 Turkey? 20 MR. EKINCI: You mean demand in domestic, in 21 Turkey market; right? It's growing, there is no impact of 22 this thing -- also, you know, there is some political 23 issues in Middle East, but it's not effect -- it's not 24 impact to our export markets, we can sell to Syria and Iraq 25 still. Also, we export to Israel, so it's growing too. Ace-Federal Reporters, Inc. 202-347-3700

175 1 MR. CORKRAN: Thank you, I appreciate that 2 response. My next question, I believe, is also, I think, 3 for Mr. Ekinci. Can you tell me if the major Turkish 4 producers have a relationship with the Independent Steel 5 Alliance in the United States? 6 MR. NOLAN: They don't know what it is. We can 7 address that in post conference. I'd have to ask a couple 8 of the other producers like Colakoglu or Icdas, but I don't 9 think anybody has a particular relationship with them. 10 That's not my -- I don't have an impression that they have 11 done anything. Otherwise there might have been a witness. 12 MR. CORKRAN: Thank you. My next question, for 13 Mr. Lee. I was looking at some global trade statistics in 14 terms of exports, and I was looking at the volume of 15 exports originating in Taiwan and entering Canada. And I 16 was trying to gauge the level of interest in the North 17 American market of the Taiwan producers. 18 It certainly appears that the volume is 19 substantially higher in 2015 than it was in prior years. 20 Can you give a sense -- or is Canada too short of number 3 21 rebar? Do we know why there is these volumes of product 22 entering Canada from Taiwan? 23 MR. LEE: I will have to look into that. I do 24 know Canada has just -- they're in the midst of their own 25 antidumping investigation on Taiwan and Japanese rebar. So Ace-Federal Reporters, Inc. 202-347-3700

176 1 -- but as to why, what types of products the Taiwanese are 2 shipping to Canada and how that compares to the products 3 that they're shipping to the U.S., I don't have information 4 on that yet. But I'll try to address that in the 5 postconference brief. 6 MR. CORKRAN: Thank you. I appreciate that. It 7 just seemed that that was one possible area of interest. 8 For Mr. Nolan, I was very interested in the 9 presentation that you gave. I thought it was very, very 10 helpful. I wonder if in your postconference brief, if you 11 reproduce the data that's shown here in your slide 8, if 12 you might include not only the metal margin but the metal 13 spread and discuss the relative importance of those two 14 concepts. You're right that when scrap declines rapidly, 15 there can be a tendency to see the metal margin expand. 16 MR. NOLAN: Prices are chasing it down -- 17 MR. CORKRAN: My back-of-the-envelope 18 mathematics suggests that the metal spread in 2016 is not 19 much different than it was in 2014. But that's very quick 20 mathematics. But if you would please take a look at that 21 and discuss the import of the two different concepts. 22 MR. NOLAN: Will do. 23 MR. CORKRAN: And then on slide 14, one of 24 the -- one of the points that is made on here, 25 second-to-last bullet point, is that the vast majority of Ace-Federal Reporters, Inc. 202-347-3700

177 1 Turkish shipments are sold within 100 miles of port. What 2 should the Commission make of that fact if -- if the 3 situation is that the product is being -- how is the 4 product being sold? Is it being sold in back-to-back 5 transactions? You indicated that Turkish suppliers do not 6 ship without an order already in place. 7 MR. NOLAN: Right. So they have shipped to, 8 let's say they have sold to a distributor and they're going 9 to sell 20,000 tons to this distributor. It goes, goes to 10 the dock. It may sit in that yard at the dock for 45, 11 upwards of 45 days before it's taken off, because it's -- 12 it's a service that's offered, they don't charge for it. 13 So it will sit there for some period of time. 14 And then it will go into commerce, into various 15 places. And I think, you know, based on the data that 16 we've looked at and our experience, if it goes to Houston, 17 it gets sold in the Texas region in that area around 18 Houston, Dallas, Austin, Fort Worth, where there's a lot of 19 building going on. It doesn't tend to move long distances. 20 And that does give you what I would call more than a 21 theoretical construct for why there is a significant 22 difference in pricing. 23 Transportation costs matter here. If you have a 24 mill that's in the internal Midwest of the United States, 25 you'll be able to afford to charge more at that mill Ace-Federal Reporters, Inc. 202-347-3700

178 1 because the cost of your competitor from Houston getting it 2 to the middle of Indiana, that transportation cost has to 3 get into the delivered price. The customer cares about 4 your delivered price, not your FOB price. How much is it 5 going to cost to get it to me? If delivery costs add $100 6 to that product, then you have a $100 advantage selling out 7 of your mill down the street relative to somebody that's 8 going to ship it 500 miles. That's just normal. 9 If you look at where a lot of these mills are, I 10 think there are some natural advantages that are built in 11 which is why you're seeing a price premium. That's the 12 only way I can explain a lot of it, frankly. 13 MR. CORKRAN: That's one I'd like to think about 14 and ponder a little bit. Mr. Lee, I had another question 15 about imports from Taiwan. Is it your contention that -- 16 I'll use the term profile, but I mean the mix of imports in 17 terms of their size, grade, what have you, length, is 18 different in 2006 than it was -- in 2016 than it was in 19 2015? 20 And the reason I ask is because the importer 21 questionnaires capture data for the characteristics of 22 imports for 2015. Are you suggesting that it was 23 distinctly different in 2016 for the imports from Taiwan? 24 MR. LEE: I think the questionnaires have some 25 level of detail in terms of which products, which grades, Ace-Federal Reporters, Inc. 202-347-3700

179 1 you know, the different types of rebar. But I'm not sure 2 if it's enough, because I don't think it's -- if you're 3 really able to distinguish, you know, whether your customer 4 is a mom-and-pop company, you know, are they asking for 5 subbundles, are they asking for less than truckloads. 6 Then in terms of the specific orders, you know, 7 how much of that is a number 3 or how much is that an 8 irregular length? 9 So the questionnaire, I'm not necessarily saying 10 that there is a different product mix in there, but what 11 our reaction initially is that for some reason, Taiwan was 12 looked to as a viable supply alternative when, you know, 13 prior to June of 2016, they really weren't in the U.S. 14 marketplace so, you know, what products were they being 15 asked to supply? They know that it seems to be the 16 smaller -- you know, the smaller sizes, the shorter 17 lengths, the stuff that is not your run-of-the-mill rebar. 18 It's not the sufficient that's going to the major 19 construction projects. We're talking more stuff that's 20 going to, like, pull people who build swimming pools or 21 lumber yards. 22 So it seems to be our guys are supplying for a 23 smaller scale fabricator than someone else, but that's just 24 based on what our guys are shipping out, and they're trying 25 to figure out, you know, who is buying it, in terms of Ace-Federal Reporters, Inc. 202-347-3700

180 1 comparing to, you know, other buyers in the U.S. market. I 2 don't think our guys know enough about the U.S. market to 3 make an informed comment on that. 4 MR. CORKRAN: Thank you all very much for your 5 time. Thank you for appearing today. Appreciate it, and I 6 have no further questions. 7 MR. ANDERSON: Thank you, Mr. Corkran. Any 8 further questions from -- okay. 9 MR. LAROSKI: Mr. Lee and Mr. Nolan, Petitioners 10 argue that Turkey, Japan and Taiwan should be cumulated for 11 purposes of both present material injury and for purposes 12 of threat. Do you agree with the Petitioners in both of 13 those instances? 14 MR. NOLAN: Well, the statute seems to be fairly 15 clear on these points. We would obviously argue that it 16 shouldn't be cumulated, but I am a lawyer, and I know what 17 the rules say. So we will address that in the 18 postconference brief, but I expect you will follow the law 19 the way it exists. 20 MR. LEE: I think we can also address the 21 cumulation argument. I think for present material injury, 22 I think cumulation is -- you have less room on that. 23 I think for threat, I would argue that Taiwan 24 certainly should be decumulated from Turkey and Japan. 25 But, you know, we will address that in our postconference Ace-Federal Reporters, Inc. 202-347-3700

181 1 brief. 2 MR. LAROSKI: Thank you. 3 MR. ANDERSON: Okay. I just have a couple quick 4 follow-up questions to what my colleagues have asked. 5 Mr. Nolan, on this chart, it's a very popular 6 chart and very helpful. And I promised I was going to ask 7 this before Mr. Corkran asked for an update. Could you, 8 while you're adding the metal spread, could you also add 9 the data for 2013 so we have a full data set matching our 10 period of investigation? 11 MR. NOLAN: I didn't put 2013 in because it was 12 pretty flat. It didn't show much of a delta. So what 13 we're looking at is where the changes are occurring here. 14 And if you look at -- I'll put it in. I've got all the 15 data on a spreadsheet. I just have to expand it for that. 16 I made the chart and it was too busy if I did that much 17 data. 18 MR. ANDERSON: Thank you very much for doing 19 that. Mr. Lee, just a quick follow-up. I've heard and 20 we've heard your testimony today about -- I hear what 21 you're saying that there is a limited area, limited 22 products that Taiwan is competing in the U.S. market, and I 23 also understand that you're arguing that the shipments 24 mostly replaced Japanese product because the yen. 25 But my question goes to more when those products Ace-Federal Reporters, Inc. 202-347-3700

182 1 are in the market, regardless of where, what level of 2 competition are you seeing with U.S. producers, and could 3 you either now or in the posthearing brief talk about that 4 given that Petitioners have argued that they sell products 5 in all parts of the U.S. market? 6 MR. LEE: Sure. I can address that in the 7 postconference brief. But here, I think we can comment 8 generally, particularly for the West Coast, basically west 9 of the Rockies, you're looking at a market that the U.S. 10 rebar suppliers really, if you look at a map as to where 11 the U.S. producers are, and then you look at the limited 12 number of U.S. producers who are in the West Coast, what 13 products are they actually supplying. 14 What we're hearing is that the U.S. suppliers 15 what are in the western market aren't necessarily providing 16 a full range of product types or the full range of service 17 options that are being demanded on the West Coast. 18 So Mr., I believe, Byer was talking about he's 19 in Cincinnati and he, unlike the other domestic witnesses, 20 he's focusing on the smaller mom-and-pop, that's his target 21 audience there. 22 On the West Coast, I think there's a similar 23 situation where the big U.S. producers who are out there, 24 they are also focusing on the -- you know, the bigger, the 25 fatter portion of the U.S. market. And so you have smaller Ace-Federal Reporters, Inc. 202-347-3700

183 1 independent fabricators who are being shortchanged in terms 2 of what their supply options are out there. 3 And so in terms of Taiwan coming in after 4 basically not being in the U.S. market, I think the demand 5 is there for someone, please, someone fill this market 6 demand that the U.S. suppliers aren't meeting, that the 7 Japanese have become cost-prohibitive. We just are 8 desperate for some alternative supply to fill these demand 9 requirements for the smaller guys out there. 10 MR. ANDERSON: Thank you for that explanation. 11 That's very helpful. And if you have any specifics that 12 you could provide in a postconference brief, that would be 13 very much appreciated. Thank you. 14 With that, I think -- I want to thank you for 15 being here, the panel. And I know this panel has traveled 16 quite a distance to be here, so thank you for coming here. 17 And thank you for responding to our questions. 18 And now we'll just take just a couple of minutes 19 to switch and go into closing arguments, so thank you. 20 CLOSING REMARKS OF JOHN R. SHANE 21 MR. SHANE: Thank you, members of the Commission 22 Staff. I'm Jack Shane, here on behalf of the Rebar Trade 23 Action Coalition. It's been a long day. You've heard a 24 number of arguments this afternoon from Respondents, many 25 of which the Commission has heard before and rejected. The Ace-Federal Reporters, Inc. 202-347-3700

184 1 facts here are simple, straightforward and more than 2 establish a reasonable indication of material injury by 3 reason of subject imports. 4 First, as noted earlier today, the statutory 5 factors of cumulation have been met. Second, with regard 6 to the volume of imports, these are significant by any 7 measure. 8 When testifying before the Commission in the 9 last rebar case, Mr. Nolan represented that Turkey had no 10 interest in increasing shipments to the U.S., specifically 11 stating, "Turkey has dedicated the vast majority of its 12 production to Turkey and other export markets, the U.S. 13 continues to be only one small destination for Turkey's 14 export sales. They are not targeting the United States." 15 The facts tell quite a different story. Subject 16 imports increased an astounding 160 percent from 2013 to 17 2015, totaling more than 1.9 million tons in 2015. 18 These imports remain strong in the first half of 19 this year and are now increasing once again. 20 As noted by domestic industry witnesses, subject 21 rebar is piled up on the docks ready for sale at extremely 22 low prices throughout the U.S., even in places like 23 Cincinnati. 24 The Turkish industry also represented to the 25 Commission in the prior rebar case that "there is no Ace-Federal Reporters, Inc. 202-347-3700

185 1 incentive for the subject producers to price aggressively 2 in order to expand exports to the United States." 3 Once again, this statement could not have been 4 further from the truth. Instead, imports more than doubled 5 their market share over the POI, stealing share directly 6 away from the U.S. industry. As a result, U.S. producers 7 were not able to take advantage of the modest demand growth 8 in the U.S. market, with much of the increase in demand 9 going to subject imports. 10 Indeed, in 2015, U.S. consumption grew by 11 350,000 tons, while subject imports increased by over 12 850,000 tons. 13 Subject imports took not only all the growth in 14 the market during that period, but stole significant 15 additional volume away from domestic producers through 16 their dumped and subsidized imports. 17 Domestic production actually dropped by a 18 whopping 550,000 tons in 2015. 19 Third, subject imports have had significant 20 price effects depressing and suppressing U.S. prices, 21 including overwhelming underselling of the domestic 22 product. Subject imports have undersold the domestic 23 product in almost every comparison in the reported data. 24 What's more, the margins of underselling 25 actually increased, as you heard, during the period of Ace-Federal Reporters, Inc. 202-347-3700

186 1 investigation. 2 This is important because, as you heard earlier 3 today from the domestic industry, rebar is a fungible 4 product, it's extremely price-sensitive, and as a result, 5 imports have to be low enough in price to capture the sale. 6 They undercut the U.S. industry to sell volume, which is 7 exactly what they have done here. When the domestic 8 industry responds by lowering prices, importers drop their 9 prices even further, beginning a downward price spiral, 10 which in this case has resulted in a dramatic deterioration 11 in U.S. prices. 12 As subject imports surged into the market in 13 2014 and 2015, prices began to drop. The price collapse 14 then accelerated dramatically in 2016 in the first half, as 15 you know producers were forced to slash prices to maintain 16 production. Because domestic producers can drop their 17 prices only so far, the dumped and subsidized imports win 18 the sale anyway. In this way, the subject producers have 19 been able to penetrate the U.S. market quickly and easily, 20 capturing sales at the expense of the domestic industry. 21 Fourth, this loss of volume and subsequent price 22 drop has had a devastating impact on the domestic rebar 23 industry. 24 As domestic industry witnesses testified, the 25 surge of subject imports drove down U.S. industry Ace-Federal Reporters, Inc. 202-347-3700

187 1 performance, as imports surged in 2015, industry production 2 dropped by over a half million tons, as I noted previously. 3 The U.S. industry also lost over 8 percentage 4 points of market share to subject imports during the POI. 5 As the industry fought back by lowering prices to prevent 6 further hemorrhaging of market share, the industry's 7 operating income plummeted, falling by $170 million in the 8 first half of 2016, compared to the first half of last 9 year. Operating income so far this year is barely above 10 break even, while net income is actually negative. These 11 are not sustainable returns. 12 The industry's capacity utilization rate remains 13 at anemic levels. The average unit value of domestic 14 shipments has declined since 2013, including a decline of 15 over $127 a ton in interim 2016, as domestic producers 16 fought desperately to prevent further loss of market share 17 to subject imports. 18 As you heard this morning, subject imports are 19 injuring the domestic industry's workers as well, some 20 producers like Gerdau have sold off certain mills for other 21 uses, while others such as Nucor and CMC have ceased rebar 22 production in certain plants. 23 Workers have been laid off, shifts reduced, and 24 those that remain are working fewer hours and take home 25 much less pay than they were just a few short years ago. Ace-Federal Reporters, Inc. 202-347-3700

188 1 Each of these factors individually and 2 collectively constitute material injury. Indeed this 3 injury has occurred as subject imports surge into the U.S. 4 market. The injury has also occurred at a time when the 5 industry's performance should be improving as construction 6 has made modest improvements over the POI, and the 7 Commission imposed orders on dumped Mexican rebar and 8 subsidized imports from Turkey. Fifth, and finally, the 9 domestic industry is not only materially injured, but it's 10 also threatened with material injury. We'll address this 11 more directly in our brief. 12 I'd like to take just a few moments and respond 13 to some of the, I would characterize as inaccurate, 14 statements that were made in this afternoon's panel. 15 First, on the raw material issue, it appears 16 that Mr. Nolan must be looking at a different record than 17 we have here. 18 Yes, scrap prices did fall. But as I heard this 19 morning, prices, U.S. prices, fell significantly more than 20 scrap did. 21 Keep in mind, this was during a time of modest 22 increase in demand. 23 I urge you to take a look at the Commission's 24 purchaser surveys in this case, which clearly indicate that 25 low-priced subject imports are the reason for that drop in Ace-Federal Reporters, Inc. 202-347-3700

189 1 price. 2 On one of Mr. Nolan's slides, he depicted 3 results from CMC. A couple of problems with that slide. 4 First, that slide is over a year old, and, in fact, the 5 slide confirms exactly what you heard from domestic 6 industry witnesses earlier today, which is that -- which is 7 that in 2015, in order to try to maintain profitability, 8 the U.S. tried to hold firm on its prices. 9 As a result, they lost over 500,000 tons in 10 production, they had no option then towards the end of 11 2015, early 2016, to respond to try to maintain production 12 and market share to lower their price. And that's when 13 their profitability plummeted. Net profit actually went 14 negative during that time. 15 Another problem with that slide is it's more 16 than just rebar. It includes other products, such as 17 merchant bar, so there's other problems with the depictions 18 in that slide. 19 Similar problem with Mr. Nolan's slide 16 20 showing Turkey's export markets. Again, it's out of date, 21 it's 2014, which is, as you'll recall, the time that the 22 other case, the other investigation, was still ongoing. 23 If you take a look at data for 2015, for a full 24 year of 2015, you will see that the U.S. is the primary 25 export market now for Turkish exports. Ace-Federal Reporters, Inc. 202-347-3700

190 1 On Taiwan, Mr. Lee has conceded based on the 2 statute and Commission precedent that Taiwan is not 3 negligible. Also, given the fact that we have sales of all 4 three subject imports in overlapping regions, I think it's 5 clear that all the products need to be cumulated from all 6 producers. And all countries. 7 Mr. Lee also claimed that Taiwan is -- Taiwanese 8 rebar is replacing Japanese rebar. However, if you take a 9 look at the latest import statistics that shows it's just 10 not true. 11 For example, Japanese imports in August were at 12 one of their highest levels, so it's clear that Taiwan is 13 not simply coming in and replacing Japanese product. 14 Many of the other primary arguments made by 15 Respondents are ones that are all too familiar to the 16 Commission -- 17 MR. ANDERSON: Mr. Shane, I'm sorry, your red 18 light has been on, so could I ask you to consolidate? 19 Thank you. 20 MR. SHANE: Sure. Let me close up very quickly. 21 In conclusion, this is -- this is a story of 22 unrestrained import pricing, import volumes surging in and 23 a resulting slew of confirmed lost sales totaling in the 24 hundreds of thousands of tons. 25 As a result of these imports, plants have been Ace-Federal Reporters, Inc. 202-347-3700

191 1 lost, workers have been let go. The industry is in dire 2 straits, and desperately needs your help. There's no 3 question we meet the preliminary injury standard, and we 4 urge you to reject the same recycled arguments this 5 afternoon by Respondents, just as the Commission has done 6 previously, and vote affirmative in this case. Thank you 7 very much for your time. 8 MR. ANDERSON: Thank you. 9 CLOSING REMARKS OF MATTHEW NOLAN 10 MR. NOLAN: All right. This is Matt Nolan for 11 the other side. I'll probably be a little bit shorter than 12 that and not quite as polished as Mr. Shane's usual 13 top-notch presentation. 14 I would love to get through one of these cases 15 without having the word "China" come up at least 15 times 16 during the course of the day. I just think we're going to 17 be in that land for a while, and that belies a lot of the 18 problems that we're all seeing and all these cases coming 19 forward, which has nothing to do with Turkey, but that is 20 what it is. 21 So we talked about the fact that volumes did go 22 up. Yes, indeed, Turkish volumes did go up. And I've been 23 quoted many times as saying that Turkey has dedicated the 24 vast majority of its product to Turkey and other markets, 25 and well, I must be wrong, except that's not what's going Ace-Federal Reporters, Inc. 202-347-3700

192 1 on now. Except it is what's going on. 50 percent of 2 Turkish production goes into the Turkish market. Another 3 35 percent or so goes into other export markets. 4 So U.S. is not an insignificant market. It was 5 bigger than it was before. I concede the point. But it 6 sure as heck isn't the primary market. And I have and will 7 provide in the postconference the 2015 data. And yes 8 indeed, UAE or the Middle East is still the number one 9 export destination, by far, for Turkish export products. 10 We will provide you with 2015 updated data in the 11 postconference brief. 12 This case has a number of inconvenient truths 13 for the Petitioners. They don't like the fact that I use 14 American Metal Market data saying, well, there's something 15 wrong with this data. There must be something wrong with 16 this data because the rebar prices in here can't be right 17 and the scrap data here probably can't be right. 18 I submit to you that everybody uses this data, 19 and it's pretty hard to say that it's going to be wrong, 20 unless you're saying the entire data collection system for 21 the steel industry is wrong. 22 The fact is that this data is reliable. It is 23 what everybody in the industry uses, and as I said 24 repeatedly during the comments before, everybody looks at 25 the trend line analysis, what's the trend in rebar prices, Ace-Federal Reporters, Inc. 202-347-3700

193 1 what's the trend in scrap prices. If the trends are going 2 down, you tend to want to follow it down. 3 What the benefit -- what the Petitioners have 4 benefited from is when scrap prices were going down, they 5 were able to slow down the price drop and get bigger 6 margins, which is why that chart was doing this for so long 7 during the POI. They got caught in 2016 with it going the 8 other direction. Scrap prices went up quick, but they 9 couldn't change the prices quite as fast, so they got 10 caught in a cost/price squeeze from that standpoint, due 11 entirely to a rapid change in scrap prices, not imports. 12 Another inconvenient truth. Input -- import 13 prices -- underselling by imports. 14 It has always been the case in this case, in 15 every other case brought before the Commission, that Turkey 16 has found to be underselling at some level in the U.S. 17 market. We have been found to be not dumping in every 18 single case since 2003. So is the underselling by virtue 19 of unfair pricing or is the underselling due to a natural 20 structural part of the two markets in operation? 21 And I submit to you it has been that way because 22 there is a structural difference in the way Turkish imports 23 enter this market. 24 Mr. Shane made much of the CMC slide being old. 25 Yes, I admit, it is an August 2015 slide because that's the Ace-Federal Reporters, Inc. 202-347-3700

194 1 last annual report that I had available to me upon which to 2 call this data from the predominant amount of their 3 financials are in their rebar operations. If you want to 4 say these other operations had something to do with it, 5 fine. The Commission can make up its own mind. 6 But I submit to you it is illustrative at the 7 very least of what the profitability was of the U.S. 8 industry for most of the POI. 9 They like to discount a couple of things. They 10 can't escape the fact that the integrated nature of their 11 operations is very important here, and I will say this 12 until my dying breath in these cases. They have integrated 13 their operations for a reason. There is security in having 14 your own scrap operations upstream. There are benefits 15 from having your own scrap operations upstream. You can 16 buy the scrap, sell it to yourself in an internal rate of 17 return, that makes money on both ends theoretically. You 18 have secure sources to supply. You can assure yourself 19 high-quality material going into your mills, the highest 20 possible quality material. There's every reason why 21 they're doing it. I applaud them for doing it. 22 But don't say you don't get a benefit from it, 23 because why else would you be doing it? Downstream side is 24 the same thing. Why have they invested so much money in 25 Harris steel? Their downstream fabrication operations. Ace-Federal Reporters, Inc. 202-347-3700

195 1 Why is that ever-increasing portion of their sales? Why is 2 it an increasing portion of their business model? Because 3 they make more money doing it that way. That's a good 4 thing for them. 5 But it also means they insulate all that 6 production from import competition, and it has to factor 7 into the Commission's analysis at the end of the day. 8 Buy America is still relevant. I don't care 9 what they say about that. It is a law. It is a federal 10 law that dictates that you must give a preference to 11 domestic merchandise being sold for any federal or state 12 infrastructure in this country. And if you don't use it, 13 you get penalized for it, and I've gone through a few 14 enforcement proceedings in my lifetime where people didn't 15 follow those rules properly. 16 So the reality is Buy America Act, to the extent 17 it is a factor, is a real factor here. You can't discount 18 it as segmenting the U.S. market. 19 Finally, and I come back to this, transportation 20 costs do matter in this market. 21 The U.S. industry has high overall prices for a 22 couple of reasons. One, they do have some protected market 23 because of Buy America. Two, they have a protected market 24 because they have insulated downstream operations which 25 they sell to. Three, they have the ability to put plants Ace-Federal Reporters, Inc. 202-347-3700

196 1 in places that are far away from coast lines, and to the 2 extent that they have those mills, they have an inherent 3 transportation advantage over any other competitor which 4 must put stuff on a rail or a truck or a barge to get the 5 material to that location. 6 That transportation cost is built-in premium 7 that you can sell at your plant. That's standard 8 economics, right. I would do exactly the same thing if I 9 were a profit-maximizer in that business. If my mill is 10 right here and my competitor is going to charge you 20 11 bucks more to ship it to you from his mill, I'll charge you 12 $19 and pocket that, but you get a dollar off. That's just 13 natural. 14 At the end of the day, there are a lot of holes 15 in this. I do not dispute the fact that Turkey's volumes 16 increased. There is no question about that. 17 The question is did those imports increase and 18 cause some kind of injury potentially to the U.S. industry? 19 I don't think there's a reasonable indication of injury 20 here. I think the entire explanation comes from the 21 changes, the deltas in scrap prices that occurred during 22 this POI, and the fact that the U.S. industry got caught a 23 little bit at the end because scrap prices went up real 24 quick, after they have been going down so long, and there 25 was this feeling that oh, good times are going to be here Ace-Federal Reporters, Inc. 202-347-3700

197 1 for a while. 2 They are complaining that their high prices are 3 driving people to demand product from overseas. As we 4 started out this conversation, U.S. prices are inherently 5 high. You would think actually more material would be 6 coming into this country, given how high they are. And yet 7 countries like Turkey are showing some degree of restraint 8 here, simply because they don't want to put all their eggs 9 in one basket. I mean, there is the possibility that 10 dumping order could be issued here. There is the 11 possibility that a safeguards could be put in place in the 12 U.S. on this. 13 Frankly, I think if they were going to bring a 14 case, they should have brought a safeguards case, not an 15 unfair trade practices case. Because all we're hearing 16 today is volume, volume, volume. This case is all about 17 volume. I concede the volume part. It's the rest of it 18 that I don't concede. Thank you. 19 MR. ANDERSON: Thank you, Mr. Nolan. 20 On behalf of the Commission and the Staff here, 21 I would like to thank the witnesses who came here today and 22 counsel for helping us gain a better understanding of the 23 product and conditions of competition in the rebar 24 industry. Before we conclude, I want to mention a couple 25 key dates going forward in the investigation. Ace-Federal Reporters, Inc. 202-347-3700

198 1 The deadline for submission of corrections to 2 the transcript and for submission of postconference briefs 3 is Friday, October 14. If briefs contain business 4 proprietary information, a public version is due on Monday, 5 October 17. 6 And the Commission has tentatively scheduled its 7 vote on this investigation or these investigations for 8 Thursday, November 3, and it will report its determinations 9 to the Secretary of the Department of Commerce on Friday, 10 November 4. 11 The Commissioners' opinions will be transmitted 12 to the Department of Commerce on Monday, November 14. 13 And with that, again, thank you all for coming, 14 and this conference is adjourned. 15 (Whereupon, at 2:42 p.m., the hearing was 16 concluded.) 17 18 19 20 21 22 23 24 25 Ace-Federal Reporters, Inc. 202-347-3700

199 CERTIFICATE OF REPORTER TITLE: In The Matter Of: Steel Concrete Reinforcing Bar (Rebar) from Japan, Taiwan, and Turkey INVESTIGATION NOS: 701-TA-564 and 731-TA-1338-1340 HEARING DATE: 10-11-16 LOCATION: Washington, DC NATURE OF HEARING: (Preliminary) I hereby certify that the foregoing/attached transcript is a true, correct and complete record of the above-referenced proceeding(s) of the U.S. International Trade Commission. DATE: 10-11-16 SIGNED: Mark A. Jagan Signature of the Contractor or the Authorized Contractor's Representative I hereby certify that I am not the Court Reporter and that I have proofread the above-referenced transcript of the proceedings of the U.S. International Trade Commission, against the aforementioned Court Reporter's notes and recordings, for accuracy in transcription in the spelling, hyphenation, punctuation and speaker identification and did not make any changes of a substantive nature. The foregoing/attached transcript is a true, correct and complete transcription of the proceedings. SIGNED: Christopher Weiskircher Signature of Proofreader I hereby certify that I reported the above-referenced proceedings of the U.S. International Trade Commission and caused to be prepared from my tapes and notes of the proceedings a true, correct and complete verbatim recording of the proceedings. SIGNED: Carmen Smith Signature of Court Reporter Ace-Federal Reporters, Inc. 202-347-3700